uotrnf^  l 

Cf  THE 

UlWTHSmT  OF  ILLINOIS 

7  JAN  1915 

Uniform  System  of  Accounts 


Telephone  Companies 

Classes  “A”  and  “B” 


As  Prescribed  by  the 


State  Public  Utilities  Commission 

of  Illinois 


In  Accordance  with  Section  11  of  the  Act  to  Provide  for  the  Regula¬ 
tion  of  Public  Utilities.  Approved  June  30,  1913 


FIRST  ISSUE 
Effective  on  July  1,  1914 


Springfield,  Ill.,  1914 


Springfield,  III. 

Illinois  State  Journal  Co.,  State  Printers 

19  14 


n 


CONTENTS 

•  - 

.PAGE 

Order  of  the  Commission  . 5,6 

Introductory  letter .  7 

General  instructions  . 8,9 

Telephone  companies  divided  into  two  classes  .  8 

Accounts  should  show  fixed  capital,  operating  revenues  and  operating 
expenses  pertaining  solely  to  any  exchange  or  toll  system  or  common 

to  two  or  more  systems  .  8 

Balance-sheet  statement  . 10,11 

Instructions  pertaining  to  balance  sheet . 12, 13, 14 

Balance-sheet  accounts  . 12 

Cost  or  book  value  of  securities  owned .  12 

Reacquired  securities .  12 

Discount  and  premium  on  capital  stock .  12 

Discount,  expense  and  premium  on  funded  debt .  13 

Contingent  assets  and  liabilities  .  14 

Text  explanatory  of  balance-sheet  accounts . 15-25 

Fixed  capital  accounts .  26 

Instructions  pertaining  to  fixed  capital  accounts . 27-29 

Fixed  capital  defined .  27 

Costs  to  be  actual  money  costs .  27 

Interest  accruing  during  construction  period  .  27 

Costs  of  labor,  materials,  and  supplies  .  28 

Plant  and  equipment  and  other  property  purchased .  28 

Fixed  capital  withdrawn  or  retired .  28. 

Texts  explanatory  of  fixed  capital  accounts  . 30-36 

Income  statement .  37 

Instructions  pertaining  to  income  statement  .  38 

Income  account  defined  .  38 

Taxes  .  38 

Text  explanatory  of  accounts  in  income  statement . 39-43 

Corporate  surplus  or  deficit  account .  44 

Instructions  pertaining  to  corporate  surplus  or  deficit  account .  44 

Corporate  surplus  or  deficit  account  defined .  44 

Text  explanatory  of  corporate  surplus  or  deficit  account . 45,46 

Operating  revenue  accounts .  47 

Instructions  pertaining  to  operating  revenue  accounts  . .  47 

Operating  revenues  defined  .  47 

Deductions  from  revenues .  47 

Commissions . 47 

Text  explanatory  of  operating  revenue  accounts . 48-50 

Operating  expense  accounts .  51 

C.  Instructions  pertaining  to  operating  expense  accounts  . 52,54 

Repairs  defined  . 52 

O  Cost  of  repairs .  52 

Depreciation  of  plant  and  equipment .  53 

*r»  i  Extraordinary  casualties  and  unanticipated  reconstruction  .  53 

Joint  operating  expenses  . , .  54 

^  Text  explanatory  of  operating  expense  accounts  . 55-61 

^Clearing  accounts . 61,62 


UNIFORM  SYSTEM  OF  ACCOUNTS  FOR  TELEPHONE  COM¬ 
PANIES  CLASSES  “A”  AND  “B” 


At  a  Regular  Meeting  of  THE  STATE  PUBLIC  UTILITIES  COM¬ 
MISSION  OF  ILLINOIS,  held  at  its  office  in  Springfield,  Ill., 
on  the  second  day  of  July,  1914. 

The  subject  of  a  Uniform  System  of  Accounts  to  be  prescribed  for 
and  kept  by  telephone  companies  being  under  consideration,  the  following 
order  was  entered : 

It  is  ordered,  That  the  Uniform  System  of  Accounts  for  Telephone 
Companies  with  the  text  pertaining  thereto,  embodied  in  printed  form 
to  be  hereafter  known  as  First  Issue,  a  copy  of  which  is  now  before  this 
Commission,  be,  and  the  same  is  hereby,  approved;  that  a  copy  thereof 
duly  authenticated  by  the  Secretary  of  the  Commission  be  filed  in  its 
archives,  and  a  second  copy  thereof,  in  like  manner  authenticated,  in 
the  office  of  the  Chief  Accountant  and  Statistician ;  and  that  each  of  said 
copies  so  authenticated  and  filed  shall  be  deemed  an  original  record 
thereof. 

It  is  further  ordered,  That  the  said  Uniform  System  of  Accounts 
for  Telephone  Companies  with  the  text  pertaining  thereto,  be,  and  the 
same  is  hereby,  prescribed  for  the  use  of  telephone  companies  having 
annual  operating  revenues  exceeding  $50,000,  subject  to  the  provisions 
of  the  Act  to  provide  for  the  regulation  of  public  utilities,  in  the  keeping 
and  recording  of  their  accounts ;  that  each  and  every  telephone  company 
and  each  and  every  receiver  or  operating  trustee  of  any  such  telephone 
company  be  required  to  keep  all  accounts  in  conformity  therewith;  and 
that  a  copy  of  the  said  First  Issue  be  sent  to  each  and  every  such  telephone 
company  and  to  each  and  every  receiver  or  operating  trustee  of  any  such 
telephone  company. 

It  is  further  ordered,  That  any  such  telephone  company  or  any 
receiver  or  operating  trustee  of  any  such  telephone  company  may  sub¬ 
divide  any  primary  account  in  the  said  First  Issue  established  (as  per¬ 
mitted  in  the  general  instructions  contained  in  the  said  First  Issue) ;  or 
may  make  assignment  of  the  amount  charged  to  any  such  primary 
account  to  operating  divisions,  to  its  individual  lines,  or  to  States: 
Provided,  however,  That  such  subprimary  accounts  set  up  or  such  assign¬ 
ments  made  by  any  such  telephone  company  or  by  any  receiver  or 
operating  trustee  of  any  such  telephone  company  do  not  impair  the 
integrity  of  the  accounts  hereby  prescribed. 

It  is  further  ordered,  That  in  order  that  the  .  basis  of  comparison 
with  previous  years  be  not  destroyed,  any  such  telephone  company  or 
any  receiver  or  operating  trustee  of  any  such  telephone  company  may, 
during  the  twelve  months  from  the  time  that  the  said  First  Issue  becomes 
effective,  keep  and  maintain,  in  addition  to  the  accounts  hereby  prescribed, 


6 


such  portion  or  portions  of  its  present  accounts  as  may  be  deemed 
desirable  by  any  such  telephone  company,  or  by  any  receiver  or  operating 
trustee  thereof,  for  the  purpose  of  such  comparison;  or,  during  the  same 
period,  may  maintain  such  groupings  of  the  primary  accounts  hereby 
prescribed  as  may  be  desired  for  that  purpose. 

It  is  further  ordered,  That  any  such  telephone  company  or  any 
receiver  or  operating  trustee  of  any  such  telephone  company,  in  addition 
to  the  accounts  hereby  prescribed,  may  unless  otherwise  ordered,  keep  any 
temporary  or  experimental  accounts,  the  purpose  of  which  is  to  develop 
the  efficiency  of  operation:  Provided,  however,  That  such  temporary  or 
experimental  accounts  shall  not  impair  the  integrity  of  any  primary 
account  hereby  prescribed. 

It  is  further  ordered,  That  July  1,  1914,  be,  and  is  hereby,  fixed 
as  the  date  on  which  the  said  First  Issue  of  the  Uniform  System  of 
Accounts  for  telephone  companies  shall  become  effective. 

By  the  Commission: 

(seal)  Chas.  N.  Hebner,  Secretary 


7 


IlSTTRODUCTOEY  letter 


$ 


State  Public  Utilities  Commission  of  Illinois, 

Office  of  Chief  Accountant  and  Statistician, 

Springfield,  III.,  July  2,.  1914 

To  Telephone  Companies  : 

In  accordance  with  an  order  of  the  State  Public  Utilities  Commis¬ 
sion  of  Illinois,  the  text  of  which  precedes  this  letter,  this  Uniform 
System  of  Accounts  for  Telephone  Companies  is  issued. 

The  Act  to  provide  for  the  regulation  of  public  utilities  clothes 
the  Commission  with  authority  to  establish  a  system  of  accounts,  and  to 
prescribe  the  forms  of  accounts  and  the  manner  in  which  such  accounts 
shall  be  kept  by  Telephone  Companies  subject  to  the  Act. 

Attention  is  specifically  called  to  the  rules  and  regulations  pre¬ 
scribed  in  this  system  of  accounts,  as  the  same  are  obligatory  upon 
persons  having  direct  charge  of  the  accounts  of  the  public  utility  con¬ 
cerned,  and  such  persons  will  be  held  responsible  for  their  proper 
application. 

In  setting  up  this  system  of  accounts  the  Commission  has  followed 
the  Classification  for  Uniform  System  of  Accounts  for  Telephone  Com¬ 
panies  as  prescribed  by  the  Interstate  Commerce  Commission,  First  Issue 
effective  on  January  1,  1913. 

This  System  of  accounts  applies  only  to  companies  having  annual 
operating  revenues  exceeding  $50,000 ;  such  companies  being  divided  into 
two  classes,  “A”  and  “B,”  according  to  their  earning  capacity.  See 
paragraph  1,  page  8. 

A  separate  system  of  accounts  (bearing  same  date)  has  been  pre¬ 
scribed  for  Class  “C”  and  “D”  companies  having  annual  operating  rev¬ 
enues  of  $50,000,  or  less. 

An  invitation  is  extended  to  all  accounting  officers,  to  correspond 
with  this  office  should  any  question  arise  in  regard  to  the  correct  interpre¬ 
tation  of  any  account  or  rule  herein  prescribed,  in  order  that  uniformity 
may  be  obtained  in  the  application  of  the  provisions  of  the  classifications. 

M.  J.  Murphy 

Chief  Accountant  and  Statistician 


8 


GENERAL  INSTRUCTIONS 

The  records  of  telephone  companies  shall  be  kept  with  sufficient  par¬ 
ticularity  to  show  fully  the  facts  pertaining  to  all  entries  made  in  the 
accounts  provided  herein.  Where  the  full  information  is  not  recorded  in 
the  general  books,  the  entries  therein  shall  be  supported  by  the  records  in 
which  the  full  details  shall  be  shown.  Such  general  book  entries  shall 
contain  sufficient  reference  to  the  detail  records  to  permit  ready  identi¬ 
fication  of  the  latter,  and  the  detailed  records  shall  be  filed  in  such  manner 
as  to  be  readily  accessible  for  examination  by  representatives  of  the  State 
Public  Utilities  Commision  of  Illinois. 

1.  Telephone  companies  divided  .into  four  classes. — For  the  purposes 
of  the  systems  of  accounts  prescribed  by  the  State  Public  Utilities  Commis¬ 
sion  of  Illinois,  telephone  companies  are  divided  into  four  classes,  as  follows: 

Class  A. — Companies  having  average  annual  operating  revenues1  ex¬ 

ceeding  $250,000. 

Class  B. — Companies  having  average  annual  operating  revenues1  ex¬ 

ceeding  $50,000,  but  not  more  than  $250,000. 

Class  C. — Companies  having  average  annual  operating  revenues  ex¬ 

ceeding  $10,000,  but  not  more  than  $50,000. 

Class  D. — Companies  having  average  annual  operating  revenues  of 

$10,000  or  less. 

Two  sets  of  accounts  are  contained  herein  and  are  designed  to  meet 
the  respective  needs  of  companies  of  Classes  A  and  B,  indicated  above.  The 
classifications  for  these  two  classes  of  companies  are  published  jointly, 
with  the  titles  of  the  accounts  printed  in  CAPITALS  and  small  capitals, 
and  in  italics. 

Class  A  companies  shall  keep  all  the  accounts  (so  far  as  they  may  be 
applicable  to  their  affairs)  the  titles  of  which  are  printed  in  CAPITALS 
and  small  capitals  and  also  the  accounts  the  titles  of  which  are  printed 
in  italics ,  except  that  where  an  account  shown  in  CAPITALS  and  small 
capitals  is  subdivided  into  accounts  the  titles  of  which  are  printed  in 
italics,  it  is  not  required  that  the  former  be  kept.  Class  A  companies  may 
further  subdivide  any  of  the  accounts  prescribed  herein,  provided  that 
such  subdivisions  do  not  impair  the  integrity  of  any  of  the  accounts 
prescribed. 

Class  B  companies  shall  keep  all  the  accounts  (so  far  as  they  may  be 
applicable  to  their  affairs),  the  titles  of  which  are  printed  in  CAPITALS 
and  small  capitals.  Where  such  accounts  are  subdivided  into  accounts 
the  titles  of  which  are  printed  in  italics ,  it  is  not  required  that  Class  B 
companies  shall  keep  separate  accounts  for  the  latter.  Class  B  companies 
may,  if  they  so  desire,  keep  the  more  extended  accounts  prescribed  for  Class 
A  companies,  or  may  further  subdivide  such  accounts,  provided  that  such 
subdivisions  do  not  impair  the  integrity  of  any  of  the  accounts  prescribed. 

2.  Accounts  should  show  fixed  capital,  operating  revenues,  and  operating 
expenses  pertaining  solely  to  any  exchange  or  toll  system  or  common  to  two 
or  more  systems. —  (a)  Telephone  companies  should  keep  their  fixed  capital 
accounts  in  such  manner  as  will  enable  them  to  show,  when  so  required  by 


i  In  order  that  frequent  changes  may  be  avoided,  companies  operating  established  telephone  plants 
may  adopt  the  scheme  of  accounts  indicated  by  the  average  of  their  annual  revenues  for  three  years 
preceding  the  date  of  this  order.  If  at  the  close  of  any  fiscal  year  the  average  of  the  annual  revenues  for 
the  three  preceding  years  is  greater  than  the  amount  given  for  the  class  in  which  the  company  has  been 
put,  the  higher  scheme  of  accounts  should  be  adopted.  New  companies  should  estimate  the  amount  of 
their  annual  revenues  and  adopt  the  scheme  of  accounts  provided  for  companies  with  average  annual 
revenues  equal  to  the  amount  of  the  estimate. 


9 


the  Commission,  (1)  the  cost  of  fixed  capital  devoted  solely  to  any  exchange 
system,  (2)  the  cost  of  fixed  capital  devoted  solely  to  any  toll  system,  and 
(3)  the  cost  of  fixed  capital  used  in  common  by  two  or  more  exchange  or 
toll  systems. 

(6)  The  Classification  of  Operating  Revenues  provides  separate  ac¬ 
counts  for  exchange  revenue  and  for  toll  revenue.  Where  it  is  necessary 
to  apportion  the  revenue  between  these  accounts  telephone  companies  should 
be  prepared,  when  so  required  by  the  Commission,  to  furnish  the  basis  used 
in  making  such  apportionment. 

(c)  Telephone  companies  should  keep  their  operating  expense  accounts 
in  such  manner  as  will  permit  them  to  show,  when  so  required  by  the 
Commission,  (1)  the  operating  expenses  pertaining  solely  to  any  exchange 
system,  (2)  the  operating  expenses  pertaining  solely  to  any  toll  system, 
and  (3)  the  operating  expenses  which  are  common  to  two  or  more  exchange 
or  toll  systems. 


10 


BALANCE-SHEET  STATEMENT 

ASSET  ACCOUNTS 


Permanent  and  Long  Term  Investments —  page 

100.  Fixed  Capital  Installed  Prior  to  July  1,1914 .  15 

101.  Fixed  Capital  Installed  Since  June  30,  1914  .  15 

102.  Reserve  for  Accrued  Depreciation — Cr .  15 

103.  Reserve  for  Amortization  of  Intangible  Capital — Cr .  15 

104.  Construction  Work  in  Progress .  16 

105.  Investment  Securities  . . .  16 

106.  Stocks  of  System  Corporations  .  16 

107.  Funded  Debt  of  System  Corporations .  16 

108.  Miscellaneous  Stocks  . . .  16 

109.  Miscellaneous  Funded  Debt  .  16 

110.  Advances  to  System  Corporations  for  Construction,  Equipment  and 

Betterments  .  16 

111.  Miscellaneous  Investments  . .  16 

Working  Assets — 

112.  Cash  and  Deposits  .  17 

113.  Cash  .  17 

114.  Special  Deposits  .  17 

115.  Employees’  Working  Funds .  17 

116.  Marketable  Securities  . 17 

117.  Bills  Receivable  .  17 

118.  Due  from  Subscribers  and  Agents  .  17 

119.  Accounts  Receivable  from  System  Corporations .  18 

120.  Miscellaneous  Accounts  Receivable .  18 

121.  Matured  Interest  and  Dividends  Receivable  .  18 

122.  Materials  and  Supplies . 18 

123.  Other  Current  Assets  .  18 

Accrued  Income  not  Due — 

124.  Unmatered  Interest,  Dividends  and  Rents  Receivable  .  19 

Deferred  Debit  Items — 

125.  Sinking  Fund  Assets  .  19 

126.  Insurance  and  Other  Reserve  Fund  Assets  .  19 

127.  Provident  Fund  Assets .  19 

128.  Prepayments  .  19 

129.  Prepaid  Rents .  19 

130.  Prepaid  Taxes  .  19 

131.  Prepaid  Insurance  .  20 

132.  Prepaid  Directory  Expense  .  20 

133.  Other  Prepayments .  20 

134.  Unextinguished  Discount  on  Capital  Stock  . . .  20 

135.  Unamortized  Debt  Discount  and  Expense .  20 

136.  Other  Suspense .  20 

Corporate  Deficit — 

137.  Corporate  Deficit .  20 


11 


LIABILITY  ACCOUNTS 

Stock—  page 

150.  Capital  Stock  .  20 

151.  Stock  Liability  for  Conversion  of  Securities  .  21 

152.  Premiums  on  Capital  Stock .  21 

Long  Term  Debt — 

153.  Funded  Debt .  21" 

154.  Receivers’  Certificates .  22 

155.  Advances  from  System  Corporations  for  Construction,  Equipment 

and  Betterments  .  22 

Working  Liabilities — 

156.  Judgments  Unpaid  .  22 

157.  Bills  Payable  .  22 

158.  Audited  Vouchers  and  Wages  Unpaid .  22 

159.  Subscribers’  Deposits  .  23 

160.  Accounts  Payable  to  System  Corporations .  23 

161.  Miscellaneous  Accounts  Payable .  23 

162.  Matured  Interest,  Dividends  and  Rents  Unpaid .  23 

163.  Matured  Funded  Debt  Unpaid  .  23 

164.  Service  Billed  in  Advance  .  23 

165.  Other  Current  Liabilities  .  23 

Accrued  Liabilities  not  Due — 

166.  Taxes  Accrued  .  23 

167.  Other  Accrued  Liabilities  not  Due .  23 

Deferred  Credit  Items — 

168.  Unextinguished  Premium  on  Debt .  24 

169.  Insurance  and  Casualty  Reserves .  24 

170.  Liability  on  Account  of  Provident  Funds .  24 

Appropriated  Surplus — 

171.  Surplus  Invested  Since  June  30,  1914,  in  Fixed  Capital .  24 

172.  Surplus  Invested  in  Sinking  Fund  .  24 

173.  Other  Surplus  Reserved  .  25 


Corporate  Surplus — 

174.  Corporate  Surplus  Unappropriated 


25 


12 


INSTRUCTIONS  PERTAINING  TO  BALANCE  SHEET 

3.  Balance-sheet  accounts. — By  balance-sheet  accounts  are  meant  those 
titles  under  which  the  ledger  accounts  are  combined  and  summarized  to 
show  the  assets,  liabilities,  and  profit  or  loss  of  the  business  at  a  given 
time.  Where  the  title  and  definition  of  a  balance-sheet  account  clearly  in¬ 
dicate  that  it  is  a  summary  of  other  accounts,  it  is  not  required  that  a 
special  ledger  account  shall  be  raised  under  such  a  title  to  include  the 
.balance  from  the  accounts  usually  carried  on  the  ledger. 

4.  Cost  or  book  value  of  Securities  owned. — The  term  cost  or  book 
value,  as  applied  to  various  accounts  representing  securities  owned,  is  in¬ 
tended  to  recognize  the  option  of  the  company  of  carrying  its  investments 
in  securities  either  at  cost  or  at  a  reasonable  valuation  other  than  cost. 
Whenever  securities  are  acquired  they  are  to  be  entered  on  the  books  at 
cost.  If,  subsequently,  the  company  desires  to  adjust  their  value  on  ac¬ 
count  of  substantial  appreciation  or  depreciation,  the  entries  in  its  books, 
with  respect  to  such  securities,  as  well  as  its  annual  reports  to  the  Commis¬ 
sion,  should  clearly  show  the  reasons  for  making  the  adjustments. 

5.  Reacquired  securities. — The  capital  stock  and  funded  debt  liability 
accounts  in  the  balance  sheet  are  intended  to  include  only  the  par  value  of 
such  capital  stock  or  funded  debt  securities  as  have  been  actually  issued  to 
bona-fide  holders  for  value  or  such  securities  as  have  been  issued  by  other 
companies  and  have  been  assumed  by  the  accounting  company  and  are 
actually  outstanding  at  the  date  of  the  balance-sheet  statement. 

When  capital  stock  or  funded-debt  securities  have  been  actually  issued 
to  bona-fide  holders  for  value  (or  after  such  issue  by  another  company  have 
been  assumed  by  the  accounting  company)  and  after  such  issue  (or  as¬ 
sumption)  have  been  reacquired  by  the  company  under  circumstances  which 
require  that  they  shall  not  be  treated  as  paid  or  retired,  they  may  be 
charged  at  par  value  to  the  appropriate  asset  account,  but  on  the  balance- 
sheet  statement  they  should  be  shown  separately  as  a  deduction  from  both 
the  asset  and  liability  accounts  in  order  that  the  asset  accounts  for  securi¬ 
ties  owned  will  include  only  securities  of  other  companies  and  that  the 
liability  accounts  for  securities  issued  or  assumed  will  include  only  those 
in  the  hands  of  the  public. 

If  any  such  securities  are  reacquired  for  more  or  less  than  their  par 
value,  the  difference  between  the  par  value  and  the  cost  of  reacquirement, 
after  adjusting  any  amounts  carried  in  the  discount-and-premium  accounts 
or  other  accounts  with  respect  to  such  securities,  should  be  debited  or 
credited  to  Corporate  Surplus  or  Deficit  account,  unless  reacquired  for  a 
sinking  or- other  fund,  which  is  required  to  be  represented  by  a  reserve,  in 
which  case  the  difference  should  be  debited  or  credited  to  the  appropriate 
reserve  account. 

6.  Discount  and  premium  on  Capital  Stock. — Ledger  accounts  should 
be  provided  to  cover  the  discounts  and  premiums  on  each  class  of  capital 
stock  issued  or  assumd  by  the  company.  By  discount  is  meant  the  excess 
of  the  par  value  of  stocks  isued  or  assumed  over  the  actual  money  value 
of  the  consideration  received  for  such  stock  (except  stock  that  has  been  sold 
and  reacquired);  by  premium  is  meant  the  excess  of  the  actual  money 
value  of  the  consideration  received  for  stock  issued  or  assumed  over  the 
par  value  of  such  stock  (except  stock  that  has  been  sold  and  reacquired). 
Entries  in  these  accounts  representing  discounts  should  be  carried  therein 
until  offset,  (1)  by  premiums  realized  on  subsequent  sales  of  the  same 
class  of  stock,  (2)  by  assessments  levied  on  the  stockholders,  (3)  by  ap¬ 
propriations  of  surplus  for  that  purpose,  or  (4)  by  charges  to  Corporate 


13 


Surplus  or  Deficit  account  upon  reacquirement  or  retirement  of  the  stock. 
Entries  in  these  accounts  representing  premiums  realized  should  be  carried 
permanently,  unless  offset  (1)  by  discounts  suffered  on  sales  of  the  same 
class  of  stock  or  (2)  by  credits  to  Corporate  Surplus  or  Deficit  account  upon 
reacquirement  or  retirement  of  the  stock. 

If  the  net  of  the  balances  in  the  discount-and-premium  accounts  for  all 
classes  of  capital  stock  sold  or  exchanged  is  a  debit  balance,  the  amount 
should  be  included  in  the  balance-sheet  statement  in  account  No.  134, 
“Unextinguished  Discount  on  Capital  Stock”;  if  a  credit  balance,  the  amount 
should  be  shown  in  account  No.  152,  “Premiums  on  Capital  Stock.” 

In  no  case  should  discount  on  capital  stock  be  charged  to  or  included 
in  any  account  as  a  part  of  the  cost  of  acquiring  any  property,  tangible  or 
intangible,  or  as  a  part  of  the  cost  of  operation. 

7.  Discount,  Expense,  and  Premium  on  Funded  Debt. — Ledger  accounts 
should  be  provided  to  cover  the  discount,  expense,  and  premiums  on  each 
class  of  funded  debt  issued  or  assumed  by  the  company.  By  discount  Is 
meant  the  excess  of  the  par  value  of  funded-debt  securities  issued  or  as¬ 
sumed,  and  the  accrued  interest  thereon,  over  the  actual  cash  value  of  the 
consideration  received  for  such  securities  (except  securities  that  have  been 
sold  and  reacquired);  by  premium  is  meant  the  excels  of  the  actual  cash 
value  of  the  consideration  received  for  funded-debt  securities  issued  or 
assumed  over  the  par  value  of  such  securities  and  the  accrued  interest 
thereon  (except  securities  that  have  been  sold  and  reacquired). 

By  expense  is  meant  all  expenses  in  connection  with  the  issue  and  sale 
of  evidences  of  debt,  such  as  fees  for  drafting  mortgages  and  trust  deeds, 
fees  and  taxes  for  recording  mortgages  and  trust  deeds,  cost  of  engraving 
and  printing  bonds,  certificates  of  indebtedness,  and  other  commercial  paper 
having  a  life  of  more  than  one  year;  fees  paid  trustees  provided  for  in 
mortgages  and  trust  deeds;  fees  and  commissions  paid  underwriters  and 
brokers  for  marketing  such  evidences  of  debt  and  other  like  expense. 

If  the  net  balance  in  any  of  these  accounts  is  a  debit,  there  should  be 
charged  to  income  account  No.  338,  “Amortization  of  Debt  Discount  and 
Expense,”  during  each  fiscal  period  (and  credited  to  the  discount  and 
premium  accounts  in  which  the  discount  and  expense  is  carried)  such 
proportion  of  the  discount  and  expense  on  the  outstanding  funded  debt 
obligations  as  may  be  applicable  to  •  that  period.  This  proportion  should 
be  determined  according  to  a  rule,  the  uniform  application  of  which 
throughout  the  interval  between  the  date  of  sale  and  the  date  of  maturity, 
will  extinguish  the  discount  and  expense  on  the  funded  debt.  The  charge 
to  Income  for  any  period  shall  not  exceed  the  proportion  applicable  to  that 
period,  and  a  charge  should  be  made  for  each  period  so  long  as  any  portion 
of  the  discount  and  expense  remains  unextinguished.  In  order  that  the 
discount  and  expense  may  be  extinguished  sooner,  the  company  may,  at 
its  option,  charge  to  Corporate  Surplus  or  Deficit  account  all  or  any  por¬ 
tion  of  the  discount  and  expense  on  funded  debt  remaining  at  any  time 
une'xtinguished. 

If  the  net  balance  in  any  of  these  account  is  a  credit  there  should  be 
credited  to  income  account  No.  339,  “Release  of  Premiums  on  Debt — Cr.,” 
during  each  fiscal  period  (and  debited  to  the  discount  and  premium  ac¬ 
counts  in  which  the  premium  is  carried)  such  proportion  of  the  premium 
on  outstanding  funded  debt  obligations  as  may  be  applicable  to  that  period. 
This  proportion  should  be  determined  according  to  a  rule,  the  uniform 
application  of  which  throughout  the  interval  between  the  date  of  sale  and 
the  date  of  maturity  of  the  debt,  will  extinguish  the  premium  at  which  such 
debt  was  sold. 

If  the  net  of  the  balances  in  the  discount  and  premium  accounts  for 
all  classes  of  funded  debt  sold  or  exchanged  is  a  debit  balance,  the  amount 
should  be  included  in  account  No.  135,  “Unamortized  Debt  Discount  and 
Expense;”  if  a  credit  balance,  the  amount  should  be  included  in  account 
No.  168,  ‘“Unextinguished  Premium  on  Debt.” 

Except  as  provided  in  section  11,  page  27,  no  discount  and  expense  on 
funded  debt  should  be  charged  to  or  included  in  any  account  as  a  part  of 


14 


the  cost  of  acquiring  any  property,  tangible  or  intangible,  or  as  a  part  of 
the  cost  of  operation. 

8.  Contingent  assets  and  liabilities. — Contingent  assets  and  liabilities 
should  not  be  included  in  the  body  of  the  balance-sheet  statement,  but 
should  be  shown  in  detail  in  a  supplementary  statement  accompanying  the 
balance-sheet  statement.  Contingent  assets  represent  possible  sources  of 
value  contingent  upon  the  fulfillment  of  conditions  regarded  as  uncertain. 
Contingent  liabilities  include  items  which  may,  under  certain  conditions, 
become  obligations  of  the  company,  but  are  neither  direct  nor  assumed 
obligations  on  the  date  of  the  balance  sheet. 


15 


TEXT  EXPLANATORY  OF  BALANCE-SHEET  ACCOUNTS 


ASSET  ACCOUNTS 

PERMANENT  AND  LONG  TERM  INVESTMENTS 

100.  Fixed  Capital  Installed  Prior  to  July  1,  1914.1 

In  this  account  (on  the  balance-sheet  statement)  should  be  shown 
the  total  of  the  balances  in  the  ledger  accounts  representing  the  com¬ 
pany’s  fixed  capital,  which  was  installed  prior  to  July  1,1914,  and  which 
is  still  in  service  at  the  date  of  the  balance  sheet.  (See  text  of  this 
account  on  p.  27.) 

101.  Fixed  Capital  Installed  Since  June  30,  1914.1 

In  this  account  (on  the  balance-sheet  statement)  should  he  shown 
the  total  of  the  balances  in  the  ledger  accounts  representing  the  com¬ 
pany’s  fixed  capital  which  has  been  installed  since  June  30,  1914,  and 
which  is  still  in  service  at  the  date  of  the  balance  sheet.  (See  text  of 
this  account  on  p.  27.) 

102.  Reserve  for  Accrued  Depreciation — Cr.1 

Credit  to  this  account  such  amounts  as  are  concurrently  charged 
to  account  No,  608,  “Depreciation  of  Plant  and  Equipment,”  No.  701, 
“Shop  Expense,”  No.  702,  “Stable  and  Garage  Expense,”  and  No.  703, 
“Tool  Expense,”  to  cover  the  expense  of  depreciation  of  plant,  equipment, 
furniture,  tools  and  implements,  as  specified  in  the  text  of  these  ac¬ 
counts.  This  account  should  also  be  credited  with  any  amount  carried 
in  reserve  on  July  1,  1914,  to  cover  the  expense  of  depreciation  on  plant, 
equipment,  furniture,  tools  and  implements  installed  prior  to  that  date. 

Charge  to  this  account  the  realized  depreciation  of  tangible  fixed 
capital  installed  since  June  30,  1914,  when  such  capital  is  relinquished, 
retired,  or  destroyed,  also  the  amount  of  depreciation  carried  herein  in 
respect  to  tangible  fixed  capital  installed  prior  to  July  1,  1914,  when 
relinquished,  retired,  or  destroyed.  (See  secs.  14,  p.  28,  and  23,  p.  53.) 

Charge  also  to  this  account  such  part  of  the  expenditures  for  extra¬ 
ordinary  repairs  as  is  concurrently  credited  to  account  No.  611,  “Repairs 
Charged  to  Reserves — Cr.” 

103.  Reserve  for  Amortization  of  Intangible  Capital — Cr.1 

Credit  to  this  account  such  amounts  as  are  concurrently  charged  to 
account  No.  340,  “Amortization  of  Landed  Capital,”  and  to  account  No. 
674,  “Amortization  of  Franchises  and  Patents.”  Charge  to  this  account 
when  any  franchise,  patent,  or  landed  capital  expires  or  is  relinquished, 
the  amount  at  which  it  stood  charged  in  the  company’s  fixed  capital 
accounts  or  such  portion  thereof  as  has  been  previously  credited  to  this 
reserve.  When  any  intangible  capital  acquired  prior  to  the  raising  of 
this  reserve  expires  or  is  relinquished,  that  portion  of  its  cost  which  has 
not  been  covered  by  credits  to  this  account  or  previously  written  off 
should  be  charged  to  account  No.  414,  “Amortization  Unprovided  for 
Elsewhere.” 


1  The  total  of  accounts  Nos.  100  and  101  should  be  drawn  down  on  the  balance-sheet  statement 
and  the  total  of  accounts  Nos.  102  and  103  deducted  therefrom,  the  difference  being  shown  as  the  net 

total. 


16 


104.  Construction  Work  in  Progress. 

This  account  should  include  the  amounts  expended  upon  plant  that 
is  in  process  of  construction  under  estimates  or  work  orders,  but  is  not 
ready  for  service  at  the  date  of  the  balance  sheet.  It  includes  interest 
charged  to  construction,  also  such  proportion  of  plant  supervision 
expenses,  engineering  expenses,  tool  expenses,  supply  expenses,  and 
general  expenses  as  may  be  properly  chargeable  to  the  construction  work 
included  under  this  account. 

When  the  work  is  completed  on  any  job  the  cost  of  which  has  been 
included  in  this  account,  this  account  should  be  credited  with  the 
amount  at  which  it  stands  charged,  and  the  appropriate  fixed  capital 
or  other  accounts  should  be  concurrently  charged,  but  expenditures 
should  not  be  carried  in  this  account  beyond  the  close  of  the  fiscal  year 
next  succeeding  that  in  which  the  expenditures  were  made. 

105.  Investment  Securities. 

This  account  should  include  the  cost  or  book  value  of  stocks,  bonds, 
and  other  evidences  of  indebtedness  (including  notes  having  dates  of 
maturity  of  more  than  one  year  from  date  of  issue)  held  by  the  account¬ 
ing  company,  and  pledged  as  collateral  for  other  securities  issued  or 
assumed,  or  held  as  a  means  of  obtaining  or  exercising  control  over 
other  corporations,  for  devotion  to  future  operations,  or  for  securing 
other  business  advantages. 

In  stating  this  account  or  the  subaccounts  provided  hereunder  on 
the  balance-sheet  statement  the  par  value  of  securities  issued  or  assumed 
by  the  accounting  company  and  carried  in  this  account  should  be 
deducted  in  order  that  this  account  will  show  only  the  cost  or  book 
value  of  securities  of  other  companies.  (See  sec.  5,  p.  12.) 

The  following  subaccounts  should  be  kept  by  class  A  companies: 

106.  Stocks  of  System  Corporations } 

107.  Funded  Debt  of  System  Corporations.1 

108.  Miscellaneous  Stocks. 

109.  Miscellaneous  Funded  Debt. 

Note  A— Short-term  notes  payable  upon  demand  or  having  dates  of  maturity  of  one 
year  or  less  from  the  date  oi  issue  should  not  be  included  herein  but  in  account  No.  110,  “Ad¬ 
vances  to  System  Corporations  for  Construction,  Equipment  and  Betterments,”  or  No.  117, 
“Bills  Receivable,”  as  may  be  appropriate. 

Note  B— In  the  annual  reports  of  Class  A  and  Class  B  telephone  companies  to  the  Com¬ 
mission  investments  will  be  required  to  be  classified  so  as  to  show,  those  held  subject  to  a 
lien  of  some  character  and  those  held  free  of  all  lien  or  pledge. 

110.  Advances  to  System  Corporations  for  Construction,  Equipment,  and 

Betterments. 

This  account  should  include  advances  to  controlling,  affiliated,  con¬ 
trolled,  and  subsidiary  corporations  to  enable  such  corporations  to  pay 
for  construction,  equipment,  or  additions  and  betterments,  if  such  ad¬ 
vances  are  of  a  permanent  nature  (i.  e.,  if  there  is  not  an  understanding 
that  the  advances  are  to  be  repaid  within  one  year)  or  if  it  is  under¬ 
stood  and  intended  that  reimbursement  shall  be  made  by  the  issue  of 
the  securities  of  the  debtor  corporation. 

Note  A — Gifts  to  system  corporations  made  without  expectation  of  reimbursement 
should  be  included  in  account  No.  353,  “Miscellaneous  Appropriations  from  Income,”  or 
No.  416,  “Miscellaneous  Appropriations  of  Surplus”  and  not  in  this  account. 

Note  B— Temporary  advances  on  open  accounts  to  system  corporations  and  such  advan¬ 
ces  for  purposes  other  than  construction,  equipment  and  betterments  should  be  included 
in  account  No.  119,  “Accounts  Receivable  from  System  Corporations.” 

111.  Miscellaneous  Investments. 

This  account  should  include  investments  of  a  permanent  nature  In 
property  (tangible  or  intangible)  other  than  that  held  for  the  operation 
of  the  company’s  plant  as  a  telephone  system.  It  should  include  such 
items  as  investments  in  lighting,  water,  and  power  plants,  manufactur¬ 
ing  plants,  lands,  and  buildings  and  other  property  not  a  part  of  the 
company’s  plant  for  telephone  operations  or  of  facilities  incident 
thereto. 


1  By  a  system  corporation  is  meant  any  controlling,  affiliated,  controlled,  or  subsidiary  corporation. 


17 


WORKING  ASSETS 


112.  Cash  and  Deposits. 

This  account  includes  the  various  items  respecting  cash  and  special 
deposits  as  provided  in  the  following  subaccounts: 

113.  Gash. 

This  account  should  include  the  amount  of  current  funds  available 
for  use  on  demand  in  the  hands  of  financial  officers  and  agents,  or 
deposited  in  banks  or  with  trust  companies,  and  cash  in  transit  for 
which  agents  receive  current  credit. 

114.  Special  Deposits. 

■  '  This  atcount^  should  include  deposits  to  pay  declared  dividends 
and  inatured  interest;  chsh  realized  from  the  sale  of  securities  and 
deposited  with  trustees  for  disbursement  when  the  purposes  for  which 
the  securities  are  sold  are  accomplished;  amounts  realized  from  the 
sale  of  property  and  deposited  with  trustees  other  than  in  sinking 
funds  until  the  property  is  replaced;  special  deposits  (in  other  than 
sinking  funds)  for  the  payment  of  debts  and  interest  not  matured; 
money  and  securities  deposited  to  secure  the  performance  of  contracts; 
and  other  deposits  of  a  special  nature  not  provided  for  elsewhere. 

In  stating  this  account  on  the  balance-sheet  statement  the  amount 
of  any  securities  issued  or  assumed  by  the  accounting  company  and 
included  herein  should  be  deducted  in  order  that  this  account  will  show 
only  the  assets  herein  other  than  the  company’s  own  securities.  (See 
sec.  5,  p.  12.) 

115.  Employees’  Working  Funds. 

This  account  should  include  amounts  advanced  to  general  and 
special  agents,  and  other  officers  and  employees  as  working  funds  from 
which  certain  expenditures  are  to  be  made  and  accounted  for. 

116.  Marketable  Securities. 

This  account  should  include  the  cost  or  book  value  of  securities  held 
in  the  company’s  treasury  unpledged  and  free  for  sale  and  not  necessary 
or  desirable  for  the  telephone  company  to  hold  for  the  purpose  of 
maintaining  the  integrity  of  its  telephone  system. 

In  stating  this  account  on  the  balance-sheet  statement  the  par 
value  of  securities  issued  or  assumed  by  the  company  and  carried  in 
this  account  should  be  deducted  in  order  that  this  account  may  show 
only  the  cost  or  book  value  of  securities  of  other  companies.  (See 
sec.  5,  p.  12.) 

117.  Bills  Receivable. 

This  account  should  include  the  cost  of  all  collectible  obligations 
in  the  form  of  bills  receivable  or  other  similar  evidences  of  money  re¬ 
ceivable  on  demand  or  within  a  time  not  exceeding  one  year  (exclud¬ 
ing  interest  coupons). 

Note  A — Notes  having  dates  of  maturity  of  more  than  one  year  after  date  of  issue  should 
not  be  included  in  this  account  but  in  account  No.  105,  “Investment  Securities,”  or  No.  116, 
“  Marketable  Securities.  ” 

Note  B— When  loans  to  system  corporations!  for  construction  purposes  are  evidenced 
by  demand  or  short-term  notes  intended  later  to  be  exchanged  for  other  securities,  the  amount 
of  such  loans  should  be  included  in  account  No.  110,  “Advances  to  system  Corporations  for 
Construction,  Equipment,  and  Betterments.” 

118.  Due  from  Subscribers  and  Agents. 

This  account  should  include  amounts  due  from  subscribers  for 
services  rendered  or  billed  and  from  agents  and  collectors  authorized 
to  make  collections  from  subscribers. 

This  account  should  be  kept  in  such  manner  as  will  enable  the 
companies  to  make  the  following  analysis,  viz: 

Ga)  Amounts  due  from  subscribers  who  are  still  receiving  tele¬ 
phone  service. 

(b)  Amounts  due  from  subscribers  whose  telephone  service  has 
been  discontinued  and  whose  accounts  are  in  process  of  collection  in 
the  usual  way. 

— 2  P  U  Teleph  A  and  B 


18 


(c)  Amounts  due  from  subscribers  whose  telephone  service  has 
been  discontinued  and  whose  accounts  are  in  litigation  or  otherwise 
suspended. 

Credit  to  a  subaccount  hereunder  such  amounts  as  may  be  con¬ 
currently  charged  to  account  No.  304,  “Uncollectible  Operating  Rev¬ 
enues,”  to  provide  a  reserve  for  uncollectible  accounts  due  from  sub¬ 
scribers  and  agents.  If  such  reserve  is  provided,  when  any  bill  for 
services  has  proved  impracticable  of  collection,  this  subaccount  should 
be  charged  and  the  account  in  which  the  bill  is  carried  should  be 
credited. 

119.  Accounts  Receivable  from  System  Corporations. 

This  account  should  include  amounts  due  from  controlling,  affili¬ 
ated,  controlled,  or  subsidiary  corporations  on  open  accounts  other  than 
those  provided  for  in  account  No.  110,  “Advances  to  System  Corpora¬ 
tions  for  Construction,  Equipment,  and  Betterments.” 

120.  Miscellaneous  Accounts  Receivable. 

This  account  should  include  all  amounts  owed  to  the  company 
upon  accounts  with  solvent  concerns  (other  than  system  corporations 
and  subscribers  and  agents),  also  the  cost  of  all  accounts  and  claims 
(except  notes  or  negotiable  bills)  upon  which  responsibility  is  ac¬ 
knowledged  by  solvent  concerns  or  which  are  sufficiently  secured  to  be 
considered  good,  and  of  all  judgments  against  solvent  concerns  where 
the  judgment  is  not  appealable  or  suspended  through  appeal. 

Note — Cash  on  deposit  in  banks  or  with  trust  companies  should  not  be  included  in  this 

account  but  in  account  No.  113,  “Cash,”  or  No.  114,  “Special  Deposits.” 

121.  Matured  Interest  and  Dividends  Receivable. 

This  account  should  include  all  interest  accrued  and  due  but  not 
yet  collected  upon  bonds,  notes,  or  other  commercial  paper  held  by  or 
for  the  benefit  of  the  company,  and  all  dividends  declared  and  due 
by  solvent  concerns  but  not  yet  collected,  the  right  to  which  is  in  the 
company. 

122.  Materials  and  Supplies. 

This  account  should  include  the  cost  of  unapplied  material,  in¬ 
cluding  the  value  of  material  temporarily  in  use  and  not  charged  out 
in  the  company’s  accounts;  articles  in  process  of  manufacture  by  the 
•  company;  tools,  fuel,  stationery,  and  other  supplies.  Freight  and  ex¬ 
press  charges  paid  on  material  included  in  this  account  should  be  in¬ 
cluded  in  the  value  of  such  material. 

Where  discounts  recovered  through  prompt  payment  can  not  be 
credited  to  the  particular  bills,  the  cost  at  which  such  materials  and 
supplies  should  be  charged  should  be  the  invoice  cost,  and  any  dis¬ 
counts  recovered  through  prompt  payment  of  bills  for  such  materials 
and  supplies  should  be  credited  to  clearing  account  No.  704,  “Supply 
Expense.” 

When  any  tangible  fixed  capital  is  discontinued,  withdrawn,  or 
retired,  and  when  any  equipment,  materials,  and  supplies  are  returned 
to  store,  the  salvage  value  thereof  should  be  charged  to  this  account, 
regardless  of  whether  such  equipment,  materials,  and  supplies  are  to 
be  consumed  in  operation  or  in  construction,  or  to  be  sold.  If  such 
value  is  not  known  and  can  not  readily  be  determined,  it  should  be 
estimated,  and  errors  in  such  estimates,  when  determined,  involved 
during  the  year  in  which  the  estimates  were  made,  should  be  adjusted 
through  the  accounts  involved;  if  later,  then  through  the  Corporate 
Surplus  or  Deficit  account. 

Inventories  of  materials  and  supplies  on  hand  and  unapplied  should 
be  taken  at  least  annually,  and  any  shortages  or  overages  disclosed 
by  such  inventories  should  be  credited  or  debited  to  this  account  and 
debited  or  credited  to  clearing  account  No.  704,  “Supply  Expense,”  in 
case  such  shortages  or  overages  can  not  be  assigned  to  specific  accounts. 

123.  Other  Current  Assets. 

This  account  should  include  the  cost  of  all  current  assets  which 
are  not  includible  under  any  of  the  foregoing  accounts.  By  current 


19 


assets  are  meant  only  those  things  that  are  readily  convertible  into 
money  and  which  are  held  not  as  investments  hut  with  the  intent  of 
being  presently  converted  into  money. 

ACCRUED  INCOME  NOT  DUE 

124.  Unmatured  Interest,  Dividends,  and  Rents  Receivable. 

This  account  should  include  the  amount  of  interest  on  loans  made 
and  rents  under  leases  accrued  to  the  date  of  the  balance  sheet,  but 
not  due  or  collectible  until  after  that  date,  and  dividends  declared  on 
stocks  owned,  and  dividends  accrued  on  such  stocks  when  contracts 
require  that  the  dividends  be  paid  at  stated  times. 

DEFERRED  DEBIT  ITEMS 

125.  Sinking  Fund  Assets. 

This  account  should  include  the  amount  of  cash,  the  cost  or  book 
value  of  live  securities  of  other  companies,  the  par  value  of  live  securi¬ 
ties  issued  or  assumed  by  the  accounting  company,  and  other  assets 
which  are  in  the  hands  of  trustees  of  sinking  and  other  funds  for  the 
purpose  of  redeeming  outstanding  obligations;  also  amounts  deposited 
with  such  trustees  on  account  of  mortgaged  property  sold.  A  separate 
account  should  be  raised  for  each  sinking  fund. 

In  stating  this  account  on  the  balance-sheet  statement  the  par 
value  of  any  securities  issued  or  assumed  by  the  company  and  carried 
in  this  account  should  be  deducted  from  the  total  in  order  to  show 
only  the  net  assets  in  sinking  funds  other  than  the  company’s  own 
securities.  (See  sec.  5,  p.  12.) 

126.  Insurance  and  Other  Reserve  Fund  Assets. 

This  account  should  include  the  amount  of  cash,  the  cost  or  book 
value  of  securities  of  other  companies,  the  par  value  of  securities  issued 
or  assumed  by  the  accounting  company,  and  other  assets  in  the  hands 
of  trustees  or  managers  of  insurance,  and  other  funds  that  have  been 
raised  and  specifically  set  aside  or  invested  by  the  company  for  specific 
purposes  (except  special  deposits,  provident  funds,  and  sinking  funds 
for  the  retirement  of  obligations).  A  separate  account  should  be  raised 
for  each  fund. 

In  stating  this  account  on  the  balance-sheet  statement  the  par 
value  of  any  securities  issued  or  assumed  by  the  company  and  carried 
in  this  account  should  be  deducted  from  the  total  in  order  to  show 
only  the  net  assets  in  the  funds  other  than  the  company’s  own  securities. 
(See  sec.  5,  p.  12.) 

127.  Provident  Fund  Assets. 

This  account  should  include  the  amount  of  cash,  and  the  cost  or 

book  value  of  securities  and  other  assets  in  the  hands  of  trustees  or 

managers  of  employees’  pension  funds,  savings  funds,  relief,  hospital, 
and  other  association  funds  (whether  contributed  by  the  company, 
by  employees,  or  by  others),  when  such  trustees  or  managers  are 
acting  for  the  company  in  the  administration  of  such  funds.  (See 
account  No.  170.) 

128.  Prepayments. 

This  account  should  include  the  balances  arising  from  the  payment 
of  rents,  taxes,  insurance,  and  like  disbursements,  in  advance  of  the 
period  to  which  they  pertain,  as  defined  in  the  following  subaccounts: 

129.  Prepaid  Rents. 

This  account  should  include  the  amount  of  rents  paid  in  advance 

of  the  enjoyment  of  the  term.  As  the  term  is  consumed,  credit  this 

account  at  monthly  intervals  and  debit  the  appropriate  rent  account 
with  the  amount  applicable  to  the  month. 

130.  Prepaid  Taxes. 

This  account  should  include  the  excess  of  taxes  paid  over  the 
amount  properly  chargeable  to  Income  or  other  accounts  as  shown  by 
the  debit  balance  in  the  Tax  Liability  account.  (See  sec.  16,  p.  38.) 


20 


131.  Prepaid  Insurance. 

When  premiums  on  insurance  policies  are  paid  in  advance  of  their 
accrual,  the  amount  prepaid  shall  be  charged  to  this  account.  As  such 
premiums  accrue,  they  should  be  credited  at  monthly  intervals  to  this 
account  and  charged  to  account  No.  668,  “Insurance.” 

132.  Prepaid  Directory  Expense. 

Charge  to  this  account  the  cost  of  preparing,  printing,  binding  and 
delivering  directories;  also  the  cost  of  soliciting  advertisements  for 
directories.  When  directories  are  issued,  this  account  should  be  credited 
each  month  and  operating  expense  account  No.  649,  “Directory  Ex¬ 
penses,”  should  be  charged  with  the  proportion  of  the  cost  based  on 
the  number  of  months  the  directory  will  be  in  use. 

133.  Other  Prepayments. 

When  prepayments  are  made  for  anything  other  than  as  provided 
for  in  the  four  next  preceding  accounts,  the  amount  of  such  prepay¬ 
ments  should  be  included  in  this  account. 

134.  Unextinguished  Discount  on  Capital  Stock. 

If  the  net  of  the  balances  in  the  discount  and  premium  accounts 
for  all  classes  of  capital  stock  sold  or  exchanged  is  a  debit  balance,  the 
amount  should  be  stated  in  this  account.  (See  sec.  6,  p.  12.) 

135.  Unamortized  Debt  Discount  and  Expense. 

If  the  net  of  the  balances  in  the  discount  and  premium  accounts 
for  all  classes  of  funded  debt  sold  or  exchanged  is  a  debit  balance,  the 
amount  should  be  stated  in  this  account.  (See  sec.  7,  p.  13.) 

136.  Other  Suspense. 

This  account  should  include  all  debits  not  provided  for  elsewhere 
and  the  proper  final  disposition  of  which  is  uncertain.  It  will  include 
all  such  items  as  expense  of  preliminary  surveys,  plans,  investigations, 
etc.,  made  for  determining  the  feasibility  of  projects  under  contempla¬ 
tion.  Should  any  such  project  later  be  carried  to  completion,  such 
amounts  should  be  credited  to  this  account  and  charged  to  the  proper 
fixed  capital  account  or  accounts;  should  it  be  abandoned,  such  amounts 
should  be  charged  to  Corporate  Surplus  or  Deficit  account. 

This  account  should  also  include  the  amounts  carried  in  suspense 
due  to  extraordinary  casualties  and  unanticipated  reconstruction.  (See 
sec.  24,  p.  53.) 

When  the  proper  disposition  of  any  item  charged  to  this  account 
is  determined,  it  should  be  credited  to  this  account  and  charged  to  the 
appropriate  account  or  accounts. 

CORPORATE  DEFICIT 

137.  Corporate  Deficit. 

Under  this  head  should  be  shown  the  debit  balance,  if  any,  in  the 
Corporate  Surplus  or  Deficit  account.  (See  sec.  17,  p.  44.) 


LIABILITY  ACCOUNTS 


STOCK 

150.  Capital  Stock. 

This  account  should  include  the  par  value  of  stock  actually  issued. 
In  case  of  the  issue  of  two  or  more  classes  of  stock  a  separate  account 
should  be  provided  for  each  class.  Credit  to  a  subaccount  entitled 
“Installments  on  Stock  Subscriptions,”  the  amount  of  installments  paid 
on  subscriptions  for  capital  stocks;  when  certificates  of  stock  are  issued 
for  installments  paid,  this  subaccount  should  be  cleared  and  the  par 
value  of  the  stock  so  issued  should  be  credited  to  the  account  appro¬ 
priate  for  such  stock. 

The  amounts  included  in  this  account,  or  in  the  subaccounts,  should 
be  subdivided  so  as  to  show  (1)  the  par  value  of  certificates  issued  and 


21 


outstanding  and  not  held  by  the  company,  its  agents  or  trustees,  and 
(2)  the  par  value  of  certificates  (pledged  or  unpledged)  issued  by  the 
company  and  held  by  or  for  it.  In  stating  the  accounts  on  the  balance- 
sheet  statement,  the  latter  amount  should  be  deducted  from  the  total  in 
order  to  show  only  the  par  value  of  the  certificates  actually  outstanding 
in  the  hands  of  the  public  at  the  date  of  the  balance-sheet  statement. 
(See  sec.  5,  p.  12.) 

Note  A — By  capital  stock,  as  the  term  is  here  used,  is  meant  those  securities  which  repre 
sent  permanent  interests  in  the  corporation,  or  interests  which,'  if  terminable,  are  so  only  at 
the  option  of  the  corporation.  Stocks  are  classified  as — 

Common  stocks,  those  whose  claims  in  the  distribution  of  dividends  are  subordinate  to 
the  claims  of  all  other  stocks. 

Preferred  stocks,  those  having  a  first  claim  upon  those  dividends  which  may  be  distributed. 

Debenture  stocks,  those  issued  under  a  contract  to  pay  a  specified  return  at  specified  inter¬ 
vals. 

No  two  stocks  should  be  considered  of  the  same  class  unless  they  are  equal  in  their  dividend 
or  interest  rights,  their  voting  rights,  and  the  conditions  under  which  they  may  be  retired. 

Note  B — If  any  issue  of  stock  is  for  money,  that  fact  should  be  stated;  and  if  for  any 
consideration  other  than  money,  the  person  to  whom  issued  should  be  designated,  and  the 
consideration  for  which  issued  should  be  described  with  sufficient  particularity  to  identify 
it.  If  such  issue  is  to  the  treasurer  or  other  agent  of  the  company,  to  be  by  him  disposed  of 
for  the  benefit  of  the  company,  that  fact  and  the  name  of  such  agent  should  be  shown;  and  such 
agent  should,  in  his  account  of  the  disposition  thereof,  show  the  like  details  concerning  the 
consideration  realized  thereon. 

Note  C — If  the  fair  cash  value  of  the  consideration  realized  upon  the  issue  of  any  amount 
of  stock  is  greater  or  less  than  the  par  value  of  such  stock  the  difference  should  be  credited 
or  charged  to  an  appropriate  discount  and  premium  account,  and  corresponding  reference 
thereto  should  be  contained  in  the  entry  relating  to  such  stock  in  the  stock  account.  (See 
sec.  6,  p.  12.) 

151.  Stock  Liability  for  Conversion  of  Securities. 

This  account  should  include  the  par  value  of  stock  that  the  com¬ 
pany  has  agreed  to  issue  in  exchange  for  securities  of  constituent  com¬ 
panies  whose  physical  property  has  been  acquired  under  such  agree¬ 
ments,  but  whose  securities  have  not  yet  been  surrendered  for  exchange. 

152.  Premiums  on  Capital  Stock. 

If  the  net  of  the  balances  in  the  discounts  and  premiums  accounts 
for  all  classes  of  capital  stock  sold  or  exchanged  is  a  credit  balance,  the 
amount  should  be  stated  in  this  account.  (See  sec.  6,  p.  12.) 


LONG  TERM  DEBT 

153.  Funded  Debt. 

This  account  should  include  the  par  value  of  funded  debt  actually 
issued  or  assumed  by  the  company.  In  case  of  two  or  more  classes  of 
funded  debt  a  separate  account  should  be  provided  for  each  class. 
Credit  to  a  subaccount,  entitled  “Installments  on  Funded  Debt  Sub¬ 
scriptions,”  the  amount  of  installments  paid  on  subscriptions  to  funded 
debt  issues.  When  bonds,  notes,  or  other  evidences  of  indebtedness  are 
delivered,  this  subaccount  should  be  cleared  and  the  par  value  of  the 
funded  debt  so  issued  should  be  credited  to  the  account  appropriate 
for  such  funded  debt.  The  entry  in  any  account  should  show  also  the 
purpose  for  which  funded  debt  is  issued. 

The  amounts  included  in  this  account,  or  in  the  subaccounts,  should 
be  subdivided  so  as  to  show  (1)  the  par  value  of  funded  debt  securities 
issued  or  assumed  and  outstanding  and  not  held  by  the  company,  its 
agents  or  trustees,  and  (2)  the  par  value  of  funded  debt  securities 
(pledged  or  unpledged)  issued  or  assumed  by  the  accounting  company 
and  held  by  or  for  it.  In  stating  the  accounts  on  the  balance-sheet 
statement  the  latter  amount  should  be  deducted  from  the  total  in  order 
to  show  only  the  par  value  of  funded  debt  securities  actually  outstand¬ 
ing  in  the  hands  of  the  public  at  the  date  of  the  balance-sheet  statement. 
(See  sec.  5,  p.  12.) 

Note  A — By  funded  debt,  as  the  term  is  here  used,  is  meant  the  par  value  of  all  bonds, 
notes  and  other  evidences  of  indebtedness  (except  open  accounts  for  advances)  which,  by 
the  terms  of  the  creation  of  the  debt,  do  not  mature  until  more  than  one  year  after  the  date 
of  such  creation.  Funded  debt  is  classified  in  accordance  with  four  principal  characteristics, 
viz:  (1)  mortgage  or  other  lien  or  security  therefor;  (2)  rate  of  interest;  (3)  interest  dates;  and 
(4)  date  of  maturity.  No  two  amounts  of  funded  debt  should  be  considered  of  the  same  class 
unless  agreeing  in  all  four  of  the  above  characteristics,  except  that  any  issue  of  securities  agree¬ 
ing  in  the  first  three  characteristics  but  maturing  serially  may  be  treated  as  of  the  same  class. 


22 


Where  any  portion  of  the  funded  debt  rests  only  on  the  general  credit  of  the  corporation  and 
is  not  specially  secured  or  supported  by  lien  of  any  character,  it  should,  for  the  purpose  of  these 
■accounts,  be  known  as  a  debenture.  Debentures  include  promissory  notes  unsecured  by 
mortgage  or  other  lien,  and  securities  commonly  known  as  plain  bonds. 

Note  B — If  the  consideration  received  for  any  issue  of  funded  debt  is  any  thing  else  than 
money,  the  entry  should  show  the  principal  to  whom  issued  and  should  describe  with  suffi- 
cent  particularity  to  identify  it  the  consideration  actually  received  for  the  issue.  If  the  issue 
is  in  any  case  to  an  agent  of  an  undisclosed  principal,  the  name  and  business  address  of  such 
agent  and  the  fact  of  his  agency  should  be  shown  in  the  entry. 

Note  C— If  the  fair  cash  value  of  the  consideration  realized  upon  the  issue  of  any  amount 
of  funded  debt  securities  is  greater  or  less  than  the  par  value  of  such  securities  plus  the  accrued 
interest,  the  difference  should  be  credited  or  charged  to  an  appropriate  discount-and-premium 
account,  and  corresponding  reference  thereto  should  be  made  in  the  entry  relating  to  such 
debt  in  the  funded  debt  account.  (See  sec.  7,  p.  13.) 

154.  Receivers’  Certificates. 

When  any  receiver  acting  under  the  orders  of  a  court  of  competent 
jurisdiction  is  in  possession  of  the  property  of  the  company  and  under 
the  orders  of  such  court  issues  certificates  of  indebtedness  chargeable 
upon  such  property,  the  par  value  of  such  certificates  should  be  credited 
to  this  account.  Interest  accruing  upon  such  certificates  should  also 
be  credited  monthly  to  this  account,  and  when  paid  should  be  charged 
to  this  account. 

155.  Advances  from  System  Corporations  for  Construction,  Equipment, 

and  Betterments. 

This  account  should  include  advances  from  controlling,  affiliated, 
controlled,  and  subsidiary  corporations  to  enable  the  accounting  com¬ 
pany  to  pay  for  construction,  equipment,  or  additions  and  betterments 
if  such  advances  are  of  a  permanent  nature  (i.  e.,  if  there  is  not  an 
understanding  that  the  advances  are  to  be  repaid  within  one  year),  or 
if  it  is  understood  and  intended  that  a  reimbursement  shall  be  made 
by  the  issue  of  the  securities  of  the  debtor  corporation. 

Note  A— Gifts  from  system  corporations  without  expectation  of  reimbursement  should 
not  be  credited  to  this  account  but  to  account  NO.  401,  “Miscellaneous  Additions  to  Surplus.” 

Note  B — Temporary  advances  on  open  accounts  from  system  corporations  and  such  ad¬ 
vances  for  purposes  other  than  construction,  equipment,  or  additions  and  betterments  should 
be  included  in  account  No.  160,  “Accounts  Payable  to  System  Corporations.” 

WORKING  LIABILITIES 

156.  Judgments  Unpaid. 

When  any  judgment  of  indebtedness  is  rendered  against  the  com¬ 
pany  by  a  court  of  competent  jurisdiction,  or  any  fine  or  penalty  re¬ 
quiring  the  payment  of  money  is  assessed  against  the  company  by 
such  a  court,  and  no  appeal  accompanied  by  stay  of  execution  has  been 
taken  therefrom  within  the  time  allowed  by  law  for  such  appeal,  the 
amount  of  such  judgment,  fine,  or  penalty  should  be  credited  to  this 
account,  and  the  entry  should  designate  the  action  or  suit  as  a  conse¬ 
quence  of  which  such  judgment  is  pronounced  or  such  fine  or  penalty 
assesed.  The  designation  of  the  action  or  suit  should  show  what  court, 
the  term  thereof,  the  parties,  and  the  character  of  the  action  or  suit. 
Interest  accruing  upon  any  such  judgment  should  be  credited  monthly 
to  this  account.  When  payment  is  made  this  account  should  be 
charged. 

Note— In  case  of  appeal  and  affirmance  in  whole  or  in  part,  from  which  judgment  of 
affirmance  a  further  appeal  lies,  the  same  rule  shall  apply  as  upon  entry  of  original  judgment. 

157.  Bills  Payable. 

This  account*  should  include  the  par  value  of  all  notes,  drafts,  and 
other  evidences  of  indebtedness,  issued  or  assumed  by  the  company, 
and  which  are  payable  on  demand  or  within  a  time  not  exceeding 
one  year. 

Note — When  loans  from  system  corporations  for  construction  purposes  are  evidenced 
by  demand  or  short-term  notes  intended  later  to  be  exchanged  for  other  securities,  the  amount 
of  such  loans  should  be  included  in  account  No.  155,  “Advances  from  System  Corporations 
for  Construction,  Equipment,  and  Betterments.” 

158.  Audited  Vouchers  and  Wages  Unpaid. 

This  account  should  include  the  amount  of  audited  vouchers  or  ac¬ 
counts  and  audited  pay  rolls  unpaid  on  the  date  of  the  balance  sheet. 
Include  also  the  amount  of  unclaimed  wages  and  outstanding  pay  and 
time  checks  issued  in  payment  of  wages. 


23 


159.  Subscribers’  Deposits. 

Credit  to  this  account,  as  such  deposits  are  made,  all  cash  deposited 
with  the  company  by  subscribers  for  telephone  service  as  security  for 
the  payment  of  bills.  Deposits  refunded  should  be  charged  to  this 
account  and  credited  to  cash.  Deposits  applied  to  uncollectible  tele¬ 
phone  bills  should  be  credited  to  the  account  of  the  subscriber  and 
charged  to  this  account. 

160.  Accounts  Payable  to  System  Corporations. 

This  account  should  include  the  amounts  owed  by  controlling,  affili¬ 
ated,  controlled,  or  subsidiary  corporations  on  open  accounts  other 
than  those  provided  for  in  account  No.  155,  “Advances  from  System 
Corporations  for  Construction,  Equipment,  and  Betterments.” 

161.  Miscellaneous  Accounts  Payable. 

This  account  should  include  all  amounts  owed  to  miscellaneous 
creditors  on  open  accounts  and  not  provided  for  elsewhere. 

162.  Matured  Interest,  Dividends,  and  Rents  Unpaid. 

This  account  should  include  interest  matured  and  unpaid  on  loans 
and  funded  debt  of  the  accounting  company,  and  of  other  companies, 
when  payment  has  been  assumed  by  the  company;  rents  due  and  un¬ 
paid  on  property  held  under  leases;  and  dividends  due  and  payable  on 
capital  stock  but  unpaid,  uncalled  for,  or  unclaimed  at  the  date  of  the 
balance  sheet. 

163.  Matured  Funded  Debt  Unpaid. 

This  account  should  include  the  amount  of  matured  mortgage, 
bonded,  and  other  funded  debt  payable,  but  not  yet  paid,  including 
bonds  drawn  for  redemption  through  the  operation  of  sinking  and  re¬ 
demption  fund  agreements. 

164.  Service  Billed  in  Advance. 

When  bills  are  made  for  service  to  be  rendered  in  future  months, 
and  the  amount  of  the  bills  is  included  in  account  No.  118,  “Due  from 
Subscribers  and  Agents,”  or  other  asset  account  but  not  in  the  revenue 
accounts,  the  proportion  of  the  bills  applicable  to  future  months  should 
be  credited  to  this  account.  As  the  term  expires  for  which  the  bill  is 
made,  the  appropriate  revenue  account  should  be  credited  and  this 
account  debited  with  the  amount  applicable  to  the  current  month. 
When  toll  coupons  or  tickets  are  sold,  this  account  should  be  credited 
with  the  amount  representing  the  service  to  be  rendered.  At  the 
end  of  each  month  this  account  should  be  charged  and  the  appropriate 
revenue  accounts  credited  with  the  amount  of  coupons  and  tickets 
(less  the  discount,  in  case  coupons  or  tickets  were  sold  at  a  discount) 
redeemed  during  that  month. 

165.  Other  Current  Liabilities. 

This  account  should  include  the  amounts  of  all  current  liabilities 
which  are  not  included  in  any  of  the  foregoing  accounts. 

ACCRUED  LIABILITIES  NOT  DUE 

166.  Taxes  Accrued. 

This  account  should  include  the  amount  of  taxes  accrued  and  properly- 
charged  against  income  or  other  accounts  in  excess  of  the  amount  of 
taxes  paid.  (See  sec.  16,  p.  38.) 

167.  Other  Accrued  Liabilities  not  Due. 

This  account  should  include  the  amount  of  interest  on  loans  and 
funded  debt,  including  interest  on  funded  debt  assumed,  and  rents 
under  leases  accrued  to  the  date  for  which  the  balance  sheet  is  made 
but  not  due  until  after  that  date;  dividends  on  stock  declared  prior  to 
the  date  of  the  balance  sheet  but  not  payable  until  after  that  date,  and 
other  liabilities  (except  taxes)  that  have  accrued  to  the  date  of  the 
balance  sheet  but  not  due  until  after  that  date. 

Note— The  interest  accruing  on  any  judgment  against  the  company  or  upon  any  receivers* 
certificate  should  be  credited  to  the  account  to  which  such  judgment  or  receivers’  certificate 
stands  credited. 


24 


DEFERRED  CREDIT  ITEMS 

168.  Unextinguished  Premium  on  Debt. 

If  the  net  of  the  balances  in  the  discount-and-premium  accounts  for 
all  classes  of  funded  debt  sold  or  exchanged  is  a  credit  balance,  the 
amount  should  be  stated  in  this  account.  (See  sec.  7,  p.  13.) 

169.  Insurance  and  Casualty  Reserves. 

This  account  should  include  any  specific  appropriation  of  income 
or  surplus  and  such  amounts  as  are  concurrently  charged  to  account 
No.  668,  “Insurance,”  to  cover  self-carried  risks  on  fire,  fidelity,  boiler, 
casualty,  burglar,  and  other  self-carried  insurance.  Charge  to  this 
account  the  proportion  of  losses  realized  on  items  protected  by  such 
self-carried  insurance. 

When  any  admitted  liability  arises  because  of  loss  or  damage  to 
the  property  of  others  or  of  injuries  to  employees  or  other  persons,  the 
amount  of  the  liability  may  (if  not  previously  provided  for  by  insurance 
or  self-insurance)  be  charged  to  the  appropriate  operating  expense  or 
other  accounts  and  credited  to  this  account,  against  which  (in  such 
case)  the  actual  cost  of  satisfaction  of  the  liability  should  be  charged 
when  the  matter  is  determined^.  If  the  extent  of  the  liability  can  not 
be  ascertained  promptly  after  the  liability  arises,  it  may  be  estimated 
as  accurately  as  practicable  for  the  purpose  of  determining  the  imme¬ 
diate  charge  to  the  expense  or  other  appropriate  account,  in  which  case 
the  matter  should  be  adjusted  when  the  extent  of  the  liability  is 
definitely  ascertained.  If  the  loss  is  of  such  character  that  it  is  in 
whole  or  in  part  indemnifiable  under  any  contract  of  insurance  carried 
by  the  company,  the  indemnifiable  portion  of  the  loss  should  be  charged 
to  the  insurer  and  credited  to  this  account. 

170.  Liability  on  Account  of  Provident  Funds. 

This  account  should  include  any  specific  appropriation*  of  income 
or  surplus  and  such  amounts  as  are  charged  to  account  No.  672,  “Relief 
Department  and  Pensions,”  to  provide  for  pension,  benefit  and  other 
provident  payments. 

This  account  should  also  include  the  ledger  balances  covering  the 
amount  of  cash  and  the  cost  or  book  value  of  securities  and  other 
assets  in  the  hands  of  trustees  or  managers  of  employees’  pension  funds, 
savings  funds,  relief,  hospital,  and  other  association  funds  (whether 
contributed  by  the  company,  by  employees,  or  by  others),  when  such 
trustees  or  managers  are  acting  for  the  company  in  the  administration 
of  such  funds;  also  the  amount  of  such  funds  held  in  the  company’s 
treasury. 

APPROPRIATED  SURPLUS 

171.  Surplus  Invested  Since  June  30,  1914,  in  Fixed  Capital. 

This  account  should  include  such  amounts  of  surplus  as  are  def¬ 
initely  set  aside  to  cover  expenditures  for  extensions  or  improvements 
of  the  fixed  capital  of  the  accounting  company;  such  appropriations 
include  those  made  for  the  purpose  of  discharging  the  principal  (less 
the  discount,  if  any,  suffered  at  the  time  of  sale)  of  any  obligations 
incurred  in  the  acquisition  of  any  property  whose  cost  is  carried  in 
the  fixed  capital  accounts.  The  amounts  credited  to  this  account  should 
be  concurrently  charged  to  account  No.  352,  “Appropriations  of  Income 
for  Construction,  Equipment,  and  Betterments,”  or  No.  415,  “Appro¬ 
priations  of  Surplus  for  Construction,  Equipment,  and  Betterments.” 

This  account  should  not  include  temporary  apropriations  for  the 
acquisition  of  property  the  cost  of  which  is  intended  later  to  be  met  by 
an  issue  of  securities,  nor  appropriations  for  the  payment  of  obligations 
which  are  intended  to  be  replaced  by  new  issues. 

172.  Surplus  Invested  in  Sinking  Funds. 

This  account  should  include  appropriations*  of  income  or  surplus 
specifically  invested  or  set  aside  in  the  hands  of  trustees  for  sinking 
and  redemption  funds,  including  accretions  to  such  funds. 


25 


The  amounts  credited  to  this  account  should  be  concurrently  charged 
to  account  No.  350,  “Appropriations  of  Income  to  Sinking  and  Other 
Reserve  Funds,”  or  No.  411,  “Appropriations  of  Surplus  to  Sinking  and 
Other  Reserve  Funds.” 

173.  Other  Surplus  Reserved. 

This  account  should  include  all  appropriations  of  income  or  surplus 
held  in  reserve  except  as  covered  by  accounts  Nos.  169,  170,  171,  and 
172.  A  separate  subaccount  should  be  raised  for  each  reserve,  and  the 
entries  in  such  subaccounts  will  be  required  to  be  shown  separately  in 
the  annual  report  to  the  Commission. 

This  account  should  also  include  the  unexpended  balance,  if  any, 
of  appropriations  intended  to  be  invested  in  fixed  capital,  and  such 
appropriations  to  sinking  or  redemption  fund  reserves  as  are  not 
specifically  invested. 

CORPORATE  SURPLUS 

174.  Corporate  Surplus  Unappropriated. 

Under  this  head  should  be  shown  the  credit  balance,  if  any,  in  the 
Corporate  Surplus  or  Deficit  account.  (See  sec.  17,  p.  44.) 


V 


26 


FIXED  CAPITAL  ACCOUNTS 

PAGE. 

100.  Fixed  Capital  Installed  Prior  to  July  1,  1914  .  30^ 

101.  Fixed  Capital  Installed  Since  June  30,  1914 . . .  30 

200.  Intangible  Capital  .  30 

201.  Organization  .  30  . 

202.  Franchises  .  30 

203.  Patent  Rights  .  31 

204.  Other  Intangible  Capital .  31 

207.  Right  of  Way .  31 

210.  Land  and  Buildings .  31 

211.  Land  . ' .  31  > 

,  212.  Buildings  .  32 

220.  Central  Office  Equipment  .  32 

221.  Central  Office  Telephone  Equipment  .  32 

_  222.  Other  Equipment  of  Central  Offices .  32 

230.  Station  Equipment  .  32 

231.  Station  Apparatus  .  32 

232.  Station  Installations  .  32 

233.  Interior  Bloch  Wires  .  33 

234.  Private  Branch  Exchanges  .  33 

v  235.  Booths  and  Special  Fittings . . .  33 

241.  Exchange  Pole  Lines  .  33  „ 

242.  Exchange  Aerial  Cable .  33 

243.  Exchange  Aerial  Wire .  33 

244.  Exchange  Underground  Conduits  . 33 

245.  Exchange  Underground  Cable  .  33 

246.  Exchange  Submarine  Cable  .  33 

251.  Toll  Pole  Lines  .  33 

252.  Toll  Aerial  Cable  .  34 

253.  Toll  Aerial  Wire .  34 

254.  Toll  Underground  Conduit  . . .  34 

255.  Toll  Underground  Cable  . 34 

256.  Toll  Submarine  Cable .  34 

260.  General  Equipment .  34 

261.  Office  Furniture  and  Fixtures  .  34 

262.  General  Shop  Equipment  . 34 

263.  General  Store  Equipment  .  34 

264.  General  Stable  and  Garage  Equipment .  34 

265.  General  Tools  and  Implements  .  35 

268.  Interest  During  Construction  .  35 

270.  Undistributed  Construction  Expenditures  .  35 

271.  Engineering  and  Superintendence .  35 

272 . 'Laic  Expenditures  During  Construction  .  35 

273.  Taxes  during  Construction .  35 

274.  Miscellaneous  Construction  Expenditures  .  36 


27 


INSTRUCTIONS  PERTAINING  TO  FIXED  CAPITAL  ACCOUNTS 

9.  Fixed  capital  defined. — By  the  fixed  capital  of  a  company  (fre¬ 
quently  termed  the  construction  account )  is  meant  the  property,  both 
tangible  and  intangible,  which  is  devoted  to  the  accomplishment  of  the 
principal  purposes  of  its  business,  and  which  has  an  expectation  of  life  in 
service  of  more  than  one  year  from  date  of  installation  in  service  (excep¬ 
tion  being  made  in  the  case  of  hand  tools  and  other  small  portable  tools 
that  may  be  lost  or  stolen). 

Fixed  capital  consists  of  original  capital,  additions,  betterments,  and 
replacements,  and  the  cost  thereof  should  be  charged  as  directed  below, 
y  Original  capital  is  the  fixed  capital  installed  or  acquired  prior  to  the 
beginning  of  regular  operations  by  the  company.  As  applied  to  a  telephone 
company  it  includes  the  acquisition  or  construction  of  the  plant  necessary 
to  begin  the  regular  operation  of  an  exchange  or  toll  system.  The  cost  of 
original  capital  should  be  charged  to  the  appropriate  subaccounts  under 
account  No.  100,  “Fixed  Capital  Installed  Prior  to  July  1,  1914,”  or  under 
account  No.  101,  “Fixed  Capital  Installed  Since  June  30,  1914.” 

Additions  are  structures,  facilities,  equipment,  and  other  properties 
added  to  those  in  service  at  the  beginning  of  operations,  and  not  taking 
the  place  of  any  property  of  like  purpose  previously  held  by  the  company. 
The  cost  of  additions  should  be  charged  to  the  appropriate  subaccounts 
under  account  No.  101,  “Fixed  Capital  Installed  Since  June  30,  1914.” 

Betterments  are  mechanical  changes  in  structures,  facilities,  or  equip¬ 
ment  which  have  as  their  primary  aim  and  result  the  making  of  the  prop¬ 
erties  affected  more  useful  or  of  greater  capacity  than  they  were  at  the 
time  of  their  installation  or  acquisition.  The  cost  of  such  portion  only  of 
the  changes  incident  to  betterments  as  will,  when  added  to  the  original  cost 
of  the  property  bettered,  give  the  cost  of  replacement  or  reconstruction  in 
present  condition  of  the  property  as  bettered  should  be  charged  to  the  appro¬ 
priate  subaccounts  under  account  No.  101,  “Fixed  Capital  Installed  Since 
June  30,  1914.”  The  remainder  of  the  cost  of  the  change  should  be  classed  as 
a  repair  and  be  charged  to  the  appropriate  operating  expense  accounts. 

Replacements  are  those  installations  of  fixed  capital  which  have  for 
their  purpose  the  substitution  of  one  building,  structure,  piece  of  equipment, 
or  machinery  for  another  which  it  has  become  necessary  to  retire,  the  sub¬ 
stitute  having  substantially  no  greater  capacity  than  the  property  replaced; 
also  the  extension  of  life  period  of  franchises,  patents,  and  other  intangible 
fixed  capital. 

The  cost  of  the  fixed  capital  retired  should  be  credited  to  the  fixed 
capital  accounts  in  which  it  is  carried  and  the  cost  of  the  fixed  capital 
installed  in  place  of  fixed  capital  so  retired  should  be  charged  to  the  appro¬ 
priate  subaccounts  under  account  No.  101,  “Fixed  Capital  Installed  Since 
June  30,  1914.” 

10.  Costs  to  be  actual  money  costs. — All  charges  made  to  fixed  capital 
or  other  property  accounts  with  respect  to  any  property  acquired  on  or 
after  July  1,  1914,  should  be  the  actual  money  costs  of  the  property.  When 
the  consideration  actually  given  for  anything  with  respect  to  which  a 
charge  is  made  to  any  fixed  capital  or  other  property  account  is  anything 
other  than  money,  the  actual  consideration  should  be  described  in  the  entry 
with  sufficient  fullness  and  particularity  to  identify  it,  and  the  amount 
charged  should  be  the  actual  money  value  of  such  consideration  at  the  time 
of  the  transaction. 

11.  Interest  accruing  during  construction  period. — Account  No.  268, 
“Interest  During  Construction,”  should  include  only  such  proportion  of  the 


28 


interest  on  funds  used  for  construction  purposes  and  of  the  discount  and 
expense  on  funded  debt  as  is  equitably  assignable  to  the  period  between 
the  date  of  the  issuance  of  securities  and  the  time  when  the  property  ac¬ 
quired  or  the  improvement  made  through  such  issuance  becomes  available 
for  the  service  for  which  it  is  intended.  The  proportion  of  interest,  dis¬ 
count,  and  expense  thus  chargeable  should  be  that  which  the  period  prior 
to  the  completion  or  coming  into  service  of  the  facilities  or  improvements 
constructed  bears  to  the  entire  life  of  the  securities  issued. 

12.  Costs  of  labor,  materials,  and  supplies. — The  term  cost  as  used 
in  the  fixed  capital  (or  construction)  accounts  means  the  actual  cost  in 
money  of  labor  and  materials  used  in  construction,  or  the  actual  cost  in 
money  of  property  acquired  after  construction,  or  if  the  consideration 
given  is  other  than  money,  the  actual  money  value  of  such  other  considera¬ 
tion  at  the  time  of  the  purchase.  Cost  of  labor  includes  not  only  wages, 
salaries,  and  fees  paid  employees,  but  also  the  personal  expenses  of  such 
employees  when  borne  by  the  company.  Cost  of  material  and  supplies 
consumed  in  construction  is  the  cost  at  the  places  where  they  enter  into 
construction,  including  cost  of  transportation  and  inspection  when  spe¬ 
cifically  assignable.  If  such  materials  and  supplies  are  passed  through 
storehouses,  their  cost  entered  in  the  account  may  include  a  suitable  pro¬ 
portion  of  store  expense. 

13.  Plant  and  equipment  and  other  property  purchased. — When  any 
property  in  the  form  of  a  going  or  completed  plant  is  purchased,  an  appraisal 
of  the  property  so  acquired  should  be  made,  and  the  different  constituent 
elements  of  the  plant  (and  equipment,  if  any)  or  other  property  acquired 
should  be  appraised  at  their  structural  value;  that  is  to  say,  at  the  esti¬ 
mated  cost  of  replacement  or  reproduction  less  deterioration  to  the  then 
existing  conditions  through  wear  and  tear,  obsolescence,  and  inadequacy. 
If  the  actual  money  value  of  the  consideration  given  for  the  plant  or  other 
property  was  at  the  time  of  the  acquisition  in  excess  of  such  appraised 
value,  the  excess  should  be  charged  to  account  No.  204,  “Other  Intangible 
Capital,”  and  the  appraised  values  of  the  constituent  elements  should  be 
charged  to  the  appropriate  fixed  capital  accounts  as  hereinafter  designated. 
If  the  actual  money  value  of  the  consideration  given  was  not  in  excess  of 
such  appraised  value,  such  actual  money  value  should  be  distributed  through 
the  said  accounts  in  proportion  to  the  said  appraised  value  of  the  consti¬ 
tuent  elements  appropriate  to  the  respective  accounts. 

Companies  should  be  prepared  to  furnish  the  Commission,  upon  demand, 
a  full  report  of  the  contract  of  acquisition,  the  consideration  given  therefor, 
the  determination  of  the  actual  money  value  of  such  consideration  if  other 
than  money,  the  appraisal,  and  the  amounts  charged  to  the  respective 
accounts  for  each  plant  or  other  such  fixed  capital  purchased.  The  pur¬ 
chaser  is  required  to  procure  in  connection  with  the  acquisition  of  any 
such  plant  or  other  fixed  capital  all  existing  records,  memoranda,  and 
accounts  in  the  possession  or  control  of  the  grantor  relating  to  the  con¬ 
struction  and  improvement  of  such  plant,  and  to  preserve  such  records, 
memoranda,  and  accounts  until  authorized  by  law  to  destroy  or  otherwise 
dispose  of  them. 

14.  Fixed  capital  withdrawn  or  retired. — (a)  When  any  tangible  fixed 
capital  acquired  prior  to  July  1,  1914,  is  withdrawn  or  retired  from  ser¬ 
vice  for  any  cause,  the  amount  at  which  it  stands  charged  should  be 
credited  to  the  subaccount  under  account  No.  100,  “Fixed  Capital  Installed 
Prior  to  July  1,  1914,”  in  which  it  is  charged,  and  such  amount,  plus 
the  expenses  incident  to  the  retirement,  less  the  value  of  salvage,  should 
be  charged  (1)  to  account  No.  102,  “Reserve  for  Accrued  Depreciation — Cr.” 
for  the  proportion  applicable  to  the  period  covered  by  the  reserve,  and  (2) 
to  account  No.  413,  “Realized  Depreciation  not  Covered  by  Reserves”  for  the 
remainder.  Such  portion  only  of  the  realized  depreciation  shall  be  charged 
to  account  No.  102,  as  is  due  to  life  in  service  during  the  period  for  which 
the  reserve  was  established;  this  portion  may  be  estimated  on  the  basis  of 
the  proportion  which  the  life  in  service  of  the  property  in  question  after 
that  date  bears  to  its  entire  life  in  service. 


29 


The  entry  of  the  credit  to  the  fixed  capital  account  should  cite  by  name 
and  page  of  book  or  other  record  the  original  entry  of  cost  of  the  thing  with¬ 
drawn.  If  there  is  no  such  original  entry,  that  fact  should  be  stated  in 
connection  with  the  credit  entry,  and  the  actual  amount  originally  charged 
should  be  credited.  If  such  amount  is  not  known,  it  should  be  estimated, 
the  facts  upon  which  the  estimate  is  based  and  the  name  of  the  person  by 
whom  estimated  should  be  shown,  and  the  amount  thus  estimated  to  be 
equivalent  to  the  original  charge  in  respect  of  such  thing  withdrawn  should 
be  credited  to  the  fixed  capital  accounts  involved. 

(b)  When  any  tangible  fixed  capital  acquired  subsequent  to  June  30, 
1914,  is  withdrawn  or  retired  from  service  for  any  cause  the  amount  at 
which  it  stands  charged  should  be  credited  to  the  fixed  capital  account  in 
which  it  is  charged,  and  such  amount,  plus  the  expenses  incident  to  the 
retirement,  less  the  value  of  salvage,  should  be  charged  to  account  No.  102, 
“Reserve  for  Accrued  Depreciation — Cr.” 

The  entry  of  the  credit  to  the  fixed  capital  account  should  cite  by  name 
and  page  of  book  or  other  record  the  original  entry  of  cost  of  the  thing 
withdrawn. 

(c)  If  the  age  of  tangible  fixed  capital  withdrawn  or  retired  from 
service  can  not  be  determined  for  classification  between  account  No.  100, 
“Fixed  Capital  Installed  Prior  to  July  1,  1914,”  and  account  No.  101,  “Fixed 
Capital  Installed  Since  June  30,  1914,”  the  property  so  retired  should  be 
treated  as  having  been  charged  to  the  former  account,  and  the  necessary 
credits  should  be  made  to  the  subaccounts  thereunder. 

(d)  When  any  fixed  capital  is  withdrawn  or  retired  whose  book  value 
as  carried  in  the  fixed  capital  accounts  has  been  reduced  by  writing  oft' 
estimated  depreciation,  only  that  part  of  the  realized  depreciation  which 
has  not  already  been  written  off  should  be  charged  to  account  No.  102, 
“Reserve  for  Accrued  Depreciation — Cr.,”  or  to  account  No.  413,  “Realized 
Depreciation  not  Covered  by  Reserves.” 

(e)  When  any  fixed  capital  is  withdrawn  or  retired  whose  book  value 
is  greater  than  the  known  or  estimated  cost,  such  excess  should  be  charged 
to  account  No.  417,  “Other  Deductions  from  Surplus,”  and  the  realized 
depreciation  should  be  charged  as  elsewhere  directed. 

(/)  If  any  fixed  capital  is  sold  for  more  than  its  original  cost,  the 
amount  of  depreciation,  if  any,  accrued  and  credited  to  a  reserve  in  respect 
thereof,  should  be  determined  as  accurately  as  possible  and  charged  to  such 
reserve.  The  sum  of  the  amount  so  charged  and  the  excess  of  the  selling 
price  over  the  cost  of  the  property  should  be  credited  to  account  No.  401, 
“Miscellaneous  Additions  to  Surplus.” 


30 


TEXT  EXPLANATORY  OF  FIXED  CAPITAL  ACCOUNTS 

100.  Fixed  Capital  Installed  Prior  to  July  1,  1914. 

This  account  is  a  summary  of  those  accounts  which  include  the 
fixed  capital  of  the  company  installed  prior  to  July  1,  1914,  and  which 
is  still  in  service  at  the  date  of  the  balance  sheet. 

The  accounts  representing  the  fixed  capital  of  the  company  as 
carried  on  its  books  at  the  close  of  June  30,  1914,  should  be  so  designated 
upon  the  books  of  the  company  as  to  show  clearly  that  they  relate  only 
to  fixed  capital  installed  prior  to  the  close  of  that  date.  •  No  debits 
should  be  made  to  such  accounts  with  respect  to  any  property  subse¬ 
quently  acquired,  but  the  cost  of  such  property  should  be  charged  to  the 
accounts  hereinafter  provided.  (See  sec.  9,  p.  27,  and  note  under  account 
No.  101.) 

Note— In  the  reports  to  the  Commission  a  statement  will  be  required  showing  the  names 
of  the  accounts  for  fixed  capital  actually  carried  by  the  company  on  June  30,  1914,  and 
the  balances  therein  at  the  date  of  the  report. 

101.  Fixed  Capital  Installed  Since  June  30,  1914. 

This  account  is  a  summary  of  accounts  Nos.  200  to  274,  inclusive, 
which  includes  the  cost  of  fixed  capital  installed  since  June  30,  1914. 
The  sum  of  the  balances  in  accounts  Nos.  200  to  274,  inclusive,  as  pro¬ 
vided  hereinafter,  should  be  shown  on  the  balance-sheet  statement  under 
this  account.  (See  sec.  9,  p.  27.) 

Note — If  the  accounts  of  a  telephone  company  have  been  kept  as  prescribed  by  a  State 
commission  and  it  is  possible  to  close  the  fixed  capital  accounts  substantially  into  the  primary 
fixed  capital  accounts  prescribed  hereinafter,  it  will  not  be  necessary  to  separate  the  fixed 
capital  accounts  as  of  July  1,  1914,  but  the  primary  accounts  under  account  No.  101  may 
include  the  fixed  capital  accounts  since  the  effective  date  of  supervision  by  the  State  com¬ 
mission,  and  the  dates  in  the  titles  of  accounts  Nos.  100  and  101  may  be  changed  accordingly. 

200.  Intangible  Capital. 

This  account  should  include  the  cost  of  intangible  capital,  as  pro¬ 
vided  for  in  the  following  subaccounts: 

201.  Organization. 

This  account  should  include  all  fees  paid  to  governments  for  the 
privilege  of  incorporation,  and  all  office  and  other  expenditures  incident 
to  organizing  the  company  or  other  enterprise  and  putting  it  in  readi¬ 
ness  to  do  business.  This  includes  the  cost  of  preparing  and  dis¬ 
tributing  prospectuses,  the  cost  of  soliciting  subscriptions  for  stock 
(but  not  for  loans  nor  for  the  purchase  of  bonds  or  other  evidence  of 
indebtedness),  cash  fees  paid  to  promoters,  and  the  actual  cash  value 
at  the  time  of  organization  of  securities  paid  to  promoters  for  their 
services  in  organizing  the  enterprise;  counsel  fees;  cost  of  preparing 
and  issuing  certificates  of  stock,  and  cost  of  procuring  certificates  of 
necessity  from  State  authorities,  and  other  like  costs. 

202.  Franchises. 

This  account  should  include  the  amount  (exclusive  of  any  tax  or 
annual  charge)  actually  paid  to  governments  as  the  consideration  for 
the  grant  of  such  franchise  or  right  as  is  necessary  to  the  conduct  of 
the  company’s  telephone  operations.  If  any  such  franchise  is  acquired 
by  assignment,  the  charge  to  this  account  in  respect  thereof  should 
not  exceed  the  amount  actually  paid  therefor  by  the  company  to  its 
assignor,  nor  should  it  exceed  the  amount  actually  paid  the  govern¬ 
ment.  Any  excess  of  the  amount  actually  paid  by  the  company  over  the 
amount  paid  by  the  original  grantee  to  the  grantor  of  the  franchise 
should  be  charged  to  account  No.  204,  “Other  Intangible  Capital.”  If 
any  such  franchise  has  a  life  of  not  more  than  one  year  after  the  date 
when  it  is  first  exercised  by  the  company,  it  should  not  be  charged  to 


31 


this  account,  but  to  the  appropriate  accounts  in  operating  expenses, 
or  in  account  No.  128,  “Prepayments,”  if  extending  beyond  the  fiscal 
year. 

Note — Annual  or  more  frequent  payments  in  respect  of  franchises  must  not  be  charged 
to  this  account,  but  to  the  appropriate  tax  or  operating  expense  account. 

203.  Patent  Rights. 

This  account  should  include  the  cost  of  all  rights  (having  a  life 
of  more  than  one  year  from  the  date  when  placed  in  service)  acquired 
by  the  company  in  or  under  valid  patents  granted  by  the  United  States 
to  inventors  for  inventions  and  discoveries  in  connection  with  the 
conduct  of  the  company’s  telephone  operations. 

204.  Other  Intangible  Capital. 

This  account  should  include  the  cost  of  all  other  property  coming 
within  the  definition  of  intangible  capital  and  devoted  to  telephone 
operations.  Entries  of  charges  to  this  account  should  describe  the 
acquired  property  with  sufficient  particularity  clearly  to  identify  it,  and 
should  also  show  specifically  the  principal  from  whom  acquired  and  all 
agents  representing  such  principal  in  the  transaction;  also  the  term  of 
life  of  such  property,  estimated  if  not  known,  and,  if  estimated,  the 
facts  upon  which  the  estimate  is  based.  (See  sec.  13,  p.  28.) 

207.  Right  of  Way. 

This  account  should  include  the  cost  of  all  land  and  interests  in 
land  acquired  for  the  location  of  telephone  wires,  cables,  pole  lines,  and 
conduits;  salaries  and  expenses  of  right-of-way  agents;  expenses  of 
appraisals  and  of  juries,  commissioners,  or  arbitrators  in  condemnation 
cases;  real-estate  brokers’  commissions;  cost  of  plats,  abstracts,  notarial 
fees,  examination  of  title,  recording  deeds,  etc. 

This  account  should  also  include  the  first  cost  of  acquiring  lease¬ 
holds  of  land  for  right  of  way,  the  terms  of  which  are  more  than  one 
year  each,  whether  acquired  through  direct  lease,  assignment,  or  other¬ 
wise  (but  not  including  the  rents  paid  periodically  in  consideration  of 
rights  obtained  under  such  leases).  If  any  such  leasehold  is  acquired 
by  assignment,  the  charge  to  this  account  must  not  exceed  the  amount 
actually  paid  therefor  by  the  accounting  company  to  the  assignor. 

210.  Land  and  Buildings. 

This  account  should  include  the  cost  of  land  and  buildings  as 
provided  for  in  the  following  subaccounts: 

211.  Land. 

This  account  should  include  the  cost  of  all  land  and  interests  in 
land,  other  than  right  of  way,  acquired  for  use  in  the  operation  of  the 

telephone  plant,  such  as  land  occupied  by  general  and  central  offices, 

shops,  stables,  garages,  storehouses,  etc.  It  includes  the  cost  of  examina¬ 
tion  and  registration  of  title,  conveyancer’s  and  notary’s  fees,  purchas¬ 
ing  agent’s  commissions  or  proportion  of  purchasing  agent’s  salary, 
taxes  accrued  to  date  of  transfer  of  title,  and  all  liens  upon  the  title, 

when  such  costs  are  assumed  or  paid  by  the  purchaser  in  his  own 

behalf;  cost  of  assessments  for  public  improvements  which  add  to  the 
value  of  the  lands  but  which  are  not  the  property  of  the  accounting 
company;  cost  of  grading  land  when  not  done  in  connection  with  build¬ 
ings;  and  costs  of  obtaining  consents  and  payments  for  abutting  dam¬ 
ages  and  expenses  of  condemnation  proceedings. 

This  account  should  also  include  the  first  cost  of  acquiring  lease¬ 
holds  of  land,  other  than  for  right  of  way,  the  terms  of  which  are  more 
than  one  year  each,  whether  acquired  through  direct  lease,  assignment, 
or  otherwise  (but  not  including  the  rents  paid  periodically  in  consider¬ 
ation  of  rights  obtained  under  such  leases).  If  any  such  leasehold  is 
acquired  by  assignment,  the  charge  to  this  account  must  not  exceed  the 
amount  actually  paid  therefor  by  the  accounting  company  to  the 
assignor. 

Note — Cost  of  buildings  and  other  improvements  (except  as  specified  above)  should 
not  be  included  in  this  subaccount.  If  at  the  time  of  acquisition  of  an  interest  in  land  such 
interest  extends  to  buildings  or  other  improvements  thereon  which  improvements  are  devoted 
by  the  company  to  telephone  operations;  and  if  the  price  of  such  improvements  is  not  deter¬ 
mined  by  the  contract,  the  buildings  or  improvements  should  be  appraised  at  their  fair  cash 


32 


value  for  use  in  such  operations,  and  such  appraised  value  shall  be  charged  to  account  No.  212, 
“Buildings.”  If  such  improvements  are  devoted  to  operations  other  than  telephone  or  held 
as  investments,  the  cost  (or  the  appraised  value,  if  the  cost  is  not  determined  in  the  contract 
of  acquisition)  should  be  charged  to  account  No.  Ill,  “Miscellaneous  Investments.”  If  the 
improvements  are  removed  or  wrecked,  the  salvage  (less  the  cost  of  removal  or  wreckage) 
should  be  credited  to  this  account. 

212.  Buildings. 

This  account  should  include  the  cost  of  all  buildings,  such  as 
general  and  central  offices,  shops,  stables,  garages,  storehouses,  etc., 
devoted  to  the  general  purposes  of  the  company;  also  of  all  permanent 
fixtures,  such  as  water,  steam,  and  gas  pipes  and  fixtures;  electric 
wiring  and  fixtures  for  lighting,  signaling,  etc.;  elevators  and  the 
engines  and  motors  specially  provided  for  operating  them;  furnaces, 
boilers,  and  other  apparatus  provided  for  producing  steam  for  such 
engines  and  for  heating;  electric  generators  specially  provided  for 
producing  current  for  lighting  such  buildings,  etc.  This  account 
includes  such  piers  and  other  foundations  for  machinery  and  apparatus 
as  are  designed  to  be  as  permanent  as  the  buildings  in  (or  in  connec¬ 
tion  with)  which  they  are  constructed,  and  to  outlast  the  first  machinery 
or  apparatus  mounted  thereon.  It  also  includes  the  cost  of  real-estate 
brokers’  commissions,  examinations  and  registrations  of  titles,  and 
other  expenses,  such  as  architects’  fees,  supervision,  etc.,  incident  to 
the  construction  or  purchase  of  buildings;  and  the  cost  of  grading  and 
of  sidewalks,  fences,  hedges,,  etc.,  on  grounds  used  in  connection  with 
such  buildings.  It  does  not  include  any  telephone  equipment,  wiring, 
or  apparatus  for  generating  or  controlling  electricity  for  operation  of 
the  telephone  system. 

220.  Central  Office  Equipment. 

This*  account  should  include  the  cost  of  all  central  office  equipment, 
as  follows: 

221.  Central  Office  Telephone  Equipment. 

This  account  should  include  the  cost  of  local  and  toll  switchboards, 
chief  operators’,  monitors’,  and  supervisors’  desks  and  tables,  wire 
chiefs’  testing  outfits,  main  and  intermediate  frames,  cables,  and  jumper 
wires,  call  registers  or  meters,  relay  racks  and  coil  racks,  and  power 
plants,  including  rectifers,  generators,  engines,  motors,  batteries,  power 
switchboards,  meters,  and  fuse  boards;  telephone  and  telegraph  instru¬ 
ments,  and  other  electrical  instruments  and  apparatus  in  the  central 
office  devoted  to  the  operation  of  the  telephone  plant. 

222.  Other  Equipment  of  Central  Offices. 

This  account  should  include  the  cost  of  furniture  and  equipment 
(other  than  telephone  equipment)  in  central  offices  for  the  operating 
forces.  This  account  includes  the  furniture  and  equipment  in  oper¬ 
ators’  rest  and  lunch  rooms,  and  in  operators’  schools. 

230.  Station  Equipment. 

This  account  should  include  the  cost  of  all  telephone  terminal 
equipment  installed  in  service,  either  for  subscribers  or  for  company 
use,  including  the  cost  of  installation,  as  follows: 

231.  Station  Apparatus. 

This  account  should  include  the  cost  of  station  apparatus,  such  as 
telephone  sets,  intercommunicating  sets,  bells,  backboards,  desk  stands, 
coin  boxes,  protectors,  battery  boxes,  initial  batteries  and  cords,  special 
station  switching  devices  not  otherwise  classified,  and  telephone  and 
telegraph  instruments  or  parts  thereof  when  owned  by  the  company 
and  installed  for  service. 

232.  Station  Installations. 

This  account  should  include  the  cost  of  installing  station  apparatus 
and  the  cost  of  the  inside  wires;  that  is,  the  wires  (or  cables)  from  the 
instruments  to  the  point  of  entrance  to  the  building,  where  the  drop 
wires  or  interior  block  wires  terminate,  or  to  the  junction  boxes,  where 
the  house  cable  or  other  cable  terminates,  including  wires  on  the  same 
premises  to  connect  main  and  extension  stations,  or  to  connect  the 
private  branch  exchange  distributing  frames  with  their  terminal  sta¬ 
tions. 


33 


233.  Interior  Block  Wires. 

This  account  should  include  the  cost  of  interior  block  wires  (or 
cables)  from  the  point  of  entrance  to  the  building,  where  connection 
is  made  with  the  inside  wires,  to  the  point  of  connection  with  the 
permanent  circuits  at  the  terminals  (block  cable  boxes)  or  the  sub¬ 
sidiary  underground  cable  or  subsidiary  aerial  cable. 

234.  Private  Branch  Exchanges. 

This  account  should  include  the  cost  of  private  branch  exchange 
switchboards,  their  distributing  frames,  the  cables  connecting  such 
switchboards  and  distributing  frames,  and  the  cost  of  installation. 

235.  Booths  and  Special  Fittings. 

This  account  should  include  the  cost  of  booths  and  special  fittings, 
such  as  desks,  chairs,  fans,  and  cash  registers,  and  the  cost  of  instal¬ 
lation. 

241.  Exchange  Pole  Lines.1 

This  account  should  include  the  cost  of  poles,  towers,  cross  arms, 
pins,  brackets,  braces,  guy  wire,  guy  stubs,  and  other  materials  used 
in  the  construction  of  exchange  service  pole  lines;  also  the  cost  of  first 
clearing  right  of  way. 

242.  Exchange  Aerial  Cable.1 

This  account  should  include  the  cost  of  cables  devoted  to  exchange 
service  including  the  cost  of  suspension  wTire,  cable  clips  and  rings, 
cable  boxes  and  fittings,  pole  seats  and  platforms,  loading  coils,  pot 
heads,  protectors,  sleeves,  and  other  material  used  in  hanging  such 
cables. 

243.  Exchange  Aerial  Wire.1 

This  account  should  include  the  cost  of  exchange  service  wires, 
including  insulators,  sleeves,  and  other  materials  used  in  attaching 
such  wires  to  the  insulators.  The  exchange  wire  includes  the  drop 
wire  leading  from  the  overhead  plant  to  the  point  of  entrance  to  the 
building. 

244.  Exchange  Underground  Conduits.1 

This  account  should  include  the  cost  of  exchange  service  conduits, 
including  the  cost  of  pipe,  cement,  manholes,  manhole  furnishings,  and 
other  materials  used,  the  cost  of  connections  to  poles  and  buildings, 
repaving,  and  other  costs  incident  to  the  installation  of  such  conduits. 

245.  Exchange  Underground  Cable.1 

This  account  should  include  the  cost  of  exchange  service  under¬ 
ground  cables,  including  cable  boxes  and  fittings,  loading  coils,  and 
other  materials  used  in  the  work  of  installing  such  cables,  and  other 
cost  incident  thereto. 

This  account  should  include,  in  addition  to  the  main  exchange 
underground  cable,  the  subsidiary  cables  through  laterals  to  pole  or 
building  terminals;  the  subsidiary  cables  to  the  interior  of  city  blocks 
for  connection  with  interior  block  wires;  and  the  subsidiary  cables 
entering  vertically  (as  house  cables)  into  buildings  for  connection 
there  with  inside  wires. 

Note— House  cables  are  considered  to  be  vertical  extensions  of  underground  cables  or 
plant  similar  thereto.  They  do  not  include  the  inside  wires  extending  from  terminal  boxes 
of  house  cables  to  subscribers’  stations,  nor  the  cables  for  subscribers’  private  branch  exchange 
switchboards  which  are  included  in  account  No.  232,  “Station  Installations.” 

246.  Exchange  Submarine  Cable.1 

This  account  should  include  the  cost  of  exchange  submarine  cable, 
cable  towers,  loading  coils,  cable  boxes  and  fittings,  and  other  materials 
used  in  the  installation  of  such  cables,  and  other  costs  incident  thereto. 

251.  Toll  Pole  Lines.1 

This  account  should  include  the  cost  of  poles,  towers,  cross  arms, 
pins,  brackets,  braces,  guy  wire,  guy  stubs,  and  other  materials  used 
in  the  construction  of  toll-service  pole  lines;  also  the  cost  of  first 
clearing  right  of  way. 

1  If  plant  is  used  both  for  exchange  and  toll  service,  the  principal  use  of  such  plant  should  determine 

its  classification. 

— 3  P  U  Teleph  A  and  B 


34 


252.  Toll  Aerial  Cable.1 

This  account  should  include  the  cost  of  cables  devoted  to  toll 
service,  including  the  cost  of  suspension  wire,  cable  clips  and  rings, 
cable  boxes  and  fittings,  pole  seats  and  platforms,  loading  coils,  pot 
heads,  protectors,  sleeves,  and  other  materials  used  in  hanging  such 
cables. 

253.  Toll  Aerial  Wire.1 

This  account  should  include  the  cost  of  toll-service  wires,  including 
insulators,  sleeves,  and  other  materials  used  in  attaching  such  wires 
to  the  insulators. 

254.  Toll  Underground  Conduit.1 

This  account  should  include  the  cost  of  toll-service  conduits,  includ¬ 
ing  the  cost  of  pipe,  cement,  manholes,  manhole  furnishings,  and  other 
materials  used,  the  cost  of  connections  to  poles  and  buildings,  repaving, 
and  other  costs  incident  to  the  installation  of  such  condpits. 

255.  Toll  Underground  Cable.1  v 

This  account  should  include  the  cost  of  toll-service  underground 
cables,  including  cable  boxes  and  fittings,  loading  coils,  and  other 
materials  used  in  the  work  of  installing  such  cables,  and  other  costs 
incident  thereto. 

256.  Toll  Submarine  Cable.1 

This  account  should  include  the  cost  of  toll  submarine  cable,  cable 
towers,  loading  coils,  cable  boxes  and  fittings,  and  other  materials  used 
in  the  installation  of  such  cables,  and  other  costs  incident  thereto. 

260.  General  Equipment. 

This  account  should  include  the  cost  of  the  equipment  classified  in 
the  subaccounts  hereunder.  Items  of  small  value  or  short  life,  such  as 
portable  tools  liable  to  be  lost  or  stolen,  temporary  shelving,  waste 
baskets,  gloves,  whips,  and  the  like,  should  not  be  included  in  this 
account  or  the  subaccounts  hereunder  but  should  be  charged  direct  to 
the  operating  expense  accounts  or  to  the  clearing  accounts. 

261.  Office  Furniture  and  Fixtures. 

This  account  should  include  the  cost  of  desks,  tables,  chairs,  car¬ 
pets,  cases,  movable  partitions,  railings,  shelves,  typewriters,  addressing 
machines,  adding  machines,  and  other  office  devices;  stoves,  portable 
gas  and  electric  fixtures,  and  other  office  fittings  (except  fittings  con¬ 
sidered  a  part  of  the  building  as  provided  for  in  account  No.  212, 
“Buildings,”  and  telephone  equipment  provided  for  under  account  No. 
220,  “Central  Office  Equipment.”) 

262.  General  Shop  Equipment. 

This  account  should  include  the  cost  of  all  equipment  specially 
provided  for  general  shops,  such  as  engines,  gas  producers,  electric 
generators,  and  other  power  apparatus  used  in  operating  machinery 
in  such  shops;  machine  tools,  shafting,  belts,  and  like  shop  equipment; 
also  such  smithing  equipment  in  general  shops  as  is  used  principally 
for  general  purposes  other  than  shoeing  horses  and  repairing  vehicles. 

Note— Hand  and  other  small  portable  tools  liable  to  be  lost  or  stolen  should  not  be  in¬ 
cluded  herein,  but  portable  tools  and  apparatus  of  special  value  may  be  charged  to  this  account 
and  remain  herein  so  long  as  record  is  kept  of  such  tools  and  apparatus. 

263.  General  Store  Equipment. 

This  account  should  include  the  cost  of  all  equipment  of  general 
store  structures,  such  as  movable  counters,  movable  shelving,  and  other 
movable  equipment  of  like  nature;  carts,  barrows,  trucks,  tools,  etc., 
and  other  apparatus  and  appliances  used  in  handling,  storing,  or  pack¬ 
ing  materials  and  supplies. 

Note — Counters,  shelving  and  the  like  which  are  permanently  attached  to  the  structure 
should  be  charged  to  account  No.  212,  “Buildings,”  and  not  to  this  account. 

264.  General  Stable  and  Garage  Equipment. 

This  account  should  include  the  cost  of  all  equipment  of  general 
stables,  including  horses,  harness,  drays,  wagons,  automobiles  and 

1  If  plant  is  used  both  for  exchange  and  toll  service,  the  principal  use  of  such  plant  should  determine 

its  classification. 


35 


other  vehicles;  equipment  of  shoeing  shops,  harness-repair  shops, 
vehicle-repair  shops,  etc. 

265.  General  Tools  and  Implements. 

This  account  should  include  the  cost  of  portable  testing  apparatus 
and  valuable  tools  and  implements  devoted  to  the  maintenance  or  con¬ 
struction  of  the  telephone  plant  and  not  provided  for  in  the  equipment 
accounts.  This  does  not  include  tools  not  yet  in  use  carried  as  supplies 
unissued. 

268.  Interest  During  Construction. 

This  account  should  include  the  interest  upon  all  moneys  (and 
credits  available  upon  demand)  devoted  to  the  construction  and  equip¬ 
ment  of  the  property  from  the  time  of  such  devotion  until  the  con¬ 
struction  is  ready  for  use.  Interest  receivable  accrued  upon  such 
moneys  (and  upon  such  credits)  should  be  credited  to  this  account. 

If  any  property  with  respect  to  which  an  interest  charge  is  in¬ 
cluded  in  this  account  is  withdrawn  or  retired  from  service,  the  amount 
of  such  interest  (estimated,  if  not  known)  should  be  credited  to  this 
account  and  charged  off  as  a  part  of  the  original  cost  of  the  property 
so  retired.  No  interest  upon  expenditures  for  replacements  or  recon¬ 
struction  should  be  included  in  this  accoimt  or  any  other  fixed  capital 
account  unless  proper  credits  are  made  to  the  appropriate  fixed  capital 
accounts  for  any  interest  included  in  such  accounts  in  respect  of  the 
property  retired  or  withdrawn.  (See  sec.  11,  p.  27.) 

270.  Undistributed  Construction  Expenditures. 

This  account  should  include  the  expenditures  provided  for  in  the 
following  subaccounts  when  such  expenditures  can  not  be  satisfactorily 
allocated  to  the  fixed  capital  accounts  to  which  they  relate.  Upon  the 
retirement  or  withdrawal  of  any  property  with  respect  to  which  any 
charge  is  included  in  this  account  or  any  subaccount  hereunder,  there 
should  be  credited  to  this  account  or  the  appropriate  subaccount  such 
part  of  the  undistributed  expenditures  during  construction  (estimated, 
if  not  known)  as  may  be  applicable  to  the  property  withdrawn  or 
retired. 

271.  Engineering  and  Superintendence. 

This  account  should  include  all  expenditures  for  services  and  ex¬ 
penses  of  engineers,  draftsmen,  and  superintendents  employed  on 
preliminary  and  construction  work  when  the  expenditures  can  not  be 
assigned  to  specific  construction  accounts. 

272.  Law  Expenditures  During  Construction. 

This  account  should  include  general  law  expenditures  incurred  in 
the  construction  of  the  telephone  plant,  such  as  the  pay  and  expenses 
of  counsel,  solicitors,  and  attorneys,  their  clerks  and  attendants,  and 
expenses  of  their  offices;  the  cost  of  printing  briefs,  legal  forms,  testi¬ 
mony,  reports,  etc.;  payments  to  arbitrators  for  the  settlement  of  dis¬ 
puted  questions;  cost  of  suits  and  payments  of  special  fees,  notarial 
fees,  and  witness  fees,  and  other  court  expenses.  When  any  of  the 
expenditures  enumerated  herein  can  be  charged  directly  to  the  account 
for  which  incurred,  they  should  be  so  charged  and  not  to  this  account. 
Expenditures  incurred  in  connection  with  the  acquisition  of  right  of 
way  should  be  charged  to  account  No.  207,  “Right  of  Way,”  and  in  the 
acquisition  of  other  land  to  account  No.  211,  “Land.”  Law  expendi¬ 
tures  in  connection  with  the  organization  of  the  corporation  should  be 
charged  to  account  No.  201,  “Organization.” 

273.  Taxes  During  Construction. 

This  account  should  include  all  taxes  and  assessments  levied  and 
paid  on  property  belonging  to  the  company  while  under  construction 
and  before  the  plant  is  opened  for  operation,  except  special  taxes 
assessed  for  street  and  other  improvements,  such  as  grading,  sewering, 
curbing,  guttering,  paving,  sidewalks,  etc.,  which  should  be  charged  to 
the  account  to  which  the  property  benefited  is  charged. 


36 


274.  Miscellaneous  Construction  Expenditures. 

This  account  should  include  salaries  and  expenses  of  executive  and 
general  officers  of  the  telephone  company  before  it  is  ready  to  begin 
operations;  clerks  in  general  offices  engaged  on  construction  accounts 
or  work;  rent  and  repair  of  general  offices  when  rented,  with  the  office 
expenses;  insurance  during  construction;  also  construction  and  equip¬ 
ment  items  of  a  special  and  incidental  nature  which  can  not  properly  be 
charged  to  any  other  fixed  capital  account. 

Note  A— This  account  may  include  a  suitable  proportion  of  supply  expenses  when  such 
expenses  are  not  assignable  to  specific  materials. 

Note  B — This  account  should  not  include  any  costs  of  organization,  or  any  costs  or  dis¬ 
counts  connected  with  the  issue  and  disposal  of  stocks,  bonds,  or  other  securities,  or  com¬ 
mercial  paper. 


J 


37 


INCOME  STATEMENT 

I.  OPERATING  INCOME 

PAGE 

300.  Telephone  Operating  Revenues .  39 

301.  Telephone  Operating  Expenses  .  39 

Net  Telephone  Operating  Revenues  (or  Deficit). 

302.  Other  Operating  Revenues  .  39 

303.  Other  Operating  Expenses  . .  .v .  39 

304.  Uncollectible  Operating  Revenues . .  39 

305.  Taxes  Assignable  to  Operations .  39 

Operating  Income  (or  Loss). 

II.  NON-OPERATING  REVENUES 

310.  Rent  Revenues  from  Lease  of  Telephone  Plant .  39 

311.  Miscellaneous  Rent  Revenues .  40 

312.  Dividend  Revenues  .  40 

313.  Interest  Revenues  .  40 

314.  Sinking  and  Other  Reserve  Fund  Accretions .  40 

315.  Profits  from  Operations  of  Others .  40 

316.  Miscellaneous  Non-operating  Revenues .  40 

III.  NON-OPERATING  REVENUE  DEDUCTIONS 

320.  Rent  Expense  .  41 

321.  Miscellaneous  Non-operating  Expense .  41 

322.  Non-operating  Taxes  .  41 

323.  Uncollectible  Non-operating  Revenues .  41 

IV.  DEDUCTIONS  FROM  GROSS  INCOME 

330.  Rent  Deductions  for  Lease  of  Telephone  Plant .  41 

331.  Rent  Deductions  for  Telephone  Offices .  41 

332.  Rent  Deductions  for  Conduits,  Poles  and  Other  Supports .  41 

333.  Rent  Deductions  for  Instruments  and  Equipment .  41 

334.  Miscellaneous  Rent  Deductions .  42 

335.  Interest  Deductions  for  Funded  Debt .  42 

336.  Other  Interest  Deductions .  42 

337.  Loss  on  Operations  of  Others .  42 

338.  Amortization  of  Debt  Discount  and  Expense  . . .  42 

339.  Release  of  Premiums  on  Debt — Cr .  42 

340.  Amortization  of  Landed  Capital . 42 

341.  Miscellaneous  Deductions  from  Income . .  42 

Net  Income  (or  Loss). 

V.  DISPOSITION  OF  NET  INCOME 

350.  Appropriations  of  Income  to  Sinking  and  Other  Reserve  Funds  ....  42 

351.  Dividend  Appropriations  of  Income  .  43 

352.  Appropriations  of  Income  for  Construction,  Equipment  and  Better¬ 

ments  .  43 

353.  Miscellaneous  Appropriations  of  Income .  43 

Income  Balance  Transferred  to  Credit  (or  Debit)  of  Corporate 

Surplus  or  Deficit  Account. 


38 


INSTRUCTIONS  PERTAINING  TO  INCOME  STATEMENT 

15.  Income  account  defined. — The  Income  Account  brings  together 
those  accounts  that  show  the  total  amount  of  money  that  the  company  has 
received  or  become  entitled  to  receive  for  services  rendered  during  a  given 
period,  the  return  accruing  upon  investments  during  the  period  and  the 
disbursements  and  obligations  (fixed  charges)  incurred  that  affect  the  dis¬ 
position  of  the  amounts  so  received  or  accrued. 

The  sum  total  of  the  credit  balances  in  the  operating  revenue  accounts 
at  the  close  of  a  fiscal  period  diminished  by  the  operating  expenses,  the 
taxes,  and  the  uncollectible  bills  assignable  to  such  operation  gives  the 
operating  income  (or  loss)  for  the  period. 

To  the  net  revenue  (or  deficit)  are  added  the  nonoperating  revenues, 
less  the  nonoperating  revenue  deductions,  which  gives  the  gross  income 
for  the  period. 

From  the  gross  income  are  deducted  various  compulsory  deductions 
grouped  herein  as  “Deductions  from  Gross  Income”;  this  gives  the  Net 
Income  (or  Loss)  for  the  particular  period.  From  the  Net  Income  are 
deducted  such  appropriations  as  are  made  from  Income;  this  gives  the 
amount  that  should  be  carried  to  the  Corporate  Surplus  or  Deficit  account. 

16.  Taxes. — Separate  accounts  should  be  kept  of  the  taxes  applicable 
to  operating  and  to  nonoperating  revenues,  and,  if  the  company  engages  in 
business  other  than  telephone  operations,  taxes  applicable  to  such  other 
business  should  also  be  kept  separate. 

The  tax  accounts  should  be  charged  each  month  and  an  open  account 
termed  “Tax  Liability  Account”  should  be  concurrently  credited  with  the 
month’s  proportion  of  taxes  applicable  to  the  operations  covered  by  each 
account.  If  the  exact  amount  of  the  annual  taxes  are  not  known,  they 
should  be  estimated  and  one-twelfth  of  the  estimated  amounts  be  charged 
each  month.  From  time  to  time  during  the  year,  as  the  actual  tax  levies 
become  known,  the  monthly  charges  should  be  adjusted  so  as  to  include  as 
nearly  as  may  be  possible  the  total  amount  of  the  taxes  in  the  period  to 
which  they  apply.  When  any  such  tax  bill  is  actually  paid,  the  “Tax  Lia¬ 
bility  Account”  should  be  debited  with  the  amount  of  the  payment.  If  the 
balance  in  the  “Tax  Liability  Account”  is  a  debit  balance,  due  to  the  pre¬ 
payment  of  taxes  applicable  to  a  period  subsequent  to  that  for  which  the 
Income  Account  is  stated,  the  amount  of  the  debit  balance  should  be  shown 
in  account  No.  130,  “Prepaid  Taxes”;  and  if  the  balance  is  a  credit  balance 
the  amount  should  be  shown  in  account  No.  166,  “Taxes  Accrued.” 

Taxes  on  property  leased  should  be  charged  to  the  appropriate  tax 
account  by  the  party  which,  under  the  terms  of  the  lease  contract,  is  obli¬ 
gated  for  such  taxes.  If  the  other  party  to  the  lease,  as  a  matter  of  con¬ 
venience,  pays  the  taxes  to  the  government  authorities,  such  taxes  should 
not  enter  its  tax  accounts  but  should  be  charged  directly  to  the  party 
obligated  for  the  taxes. 

The  tax  accounts  must  not  include  any  fees  or  charges  sometimes  called 
taxes,  such  as  water  taxes,  drainage  taxes,  fire  taxes,  etc.,  which  are  pay¬ 
ments  for  some  specified  service  rendered  by  the  government. 


39 


TEXT  EXPLANATORY  OF  ACCOUNTS  APPEARING  IN  THE  INCOME 

STATEMENT 

I.  OPERATING  INCOME 

300.  Telephone  Operating  Revenues. 

This  account  should  include  the  total  operating  revenues  derived 
from  the  telephone  operations  of  the  company  for  the  period  covered  by 
the  income  account  statement.  (For  the  primary  operating  revenue 
accounts,  see  pp.  48  to  50.) 

301.  Telephone  Operating  Expenses. 

This  account  should  include  the  total  operating  expenses  of  the 
telephone  operations  of  the  company  for  the  period  covered  by  the 
income  account  statement.  (For  the  primary  operating  expense 
accounts,  see  pp.  55  to  61.) 

302.  Other  Operating  Revenues. 

This  account  should  include  the  total  revenues  of  the  company 
derived  from  operations,  other  than  telephone  operations,  for  the  period 
covered  by  the  income  account  statement.  This  account  includes  the 
revenue  derived  from  the  operation  of  property  carried  in  balance-sheet 
account  No.  Ill,  “Miscellaneous  Investments,”  when  such  property  is 
operated  by  the  accounting  company. 

303.  Other  Operating  Expenses. 

This  account  should  include  the  total  expenses  of  operations  other 
than  telephone  operations  for  the  period  covered  by  the  income  account 
statement.  This  account  includes  the  expenses  of  the  operation  of 
property  carried  in  balance-sheet  account  No.  Ill,  “Miscellaneous  Invest¬ 
ments,”  when  such  property  is  operated  by  the  accounting  company. 

304.  Uncollectible  Operating  Revenues. 

This  account  should  include  the  amount  of  any  account  for  tele¬ 
phone  or  other  services  which,  after  a  reasonably  diligent  effort  to 
collect,  has  proved  impracticable  of  collection.  This  account  includes 
only  uncollectible  bills  for  amounts  which  have  been  treated  as  oper¬ 
ating  revenues;  other  uncollectible  bills  should  be  charged  to  account 
No.  323,  “Uncollectible  Non-operating  Revenues,”  or  to  Corporate  Surplus 
or  Deficit  account,  as  may  be  appropriate. 

This  account  may  include  monthly  charges,  based  upon  estimates, 
to  create  a  reserve  for  uncollectible  bills,  provided  such  reserve  is 
adjusted  annually  in  accordance  with  the  experience  of  the  accounting 
company.  Such  amounts  should  be  credited  to  a  subaccount  under 
account  No.  118,  “Due  from  Subscribers  and  Agents,”  to  which  should 
be  charged  bills  that  have  proved  impracticable  of  collection. 

305.  Taxes  Assignable  to  Operations. 

This  account  should  include  Federal,  State,  county,  municipal,  and 
other  taxing-district  taxes  relating  to  telephone  property,  operations, 
and  privileges  for  the  period  for  which  the  Income  Account  is  stated. 
This  account  should  also  include  the  taxes  on  other  property  and 
operations,  the  revenues  and  expenses  of  which  are  included  in  accounts 
302  and  303,  respectively.  (See  sec.  16,  p.  38.) 


II.  NON-OPERATING  REVENUES 

310.  Rent  Revenues  from  Lease  of  Telephone  Plant. 

This  account  should  include  all  revenues  from  the  company’s  in¬ 
terests  in  telephone  plant  or  equipment  held  by  others  under  some 
form  of  lease  whereby  it  surrenders  possession  of  such  property  for 
operating  purposes. 

This  account  is  intended  to  cover  only  rents  receivable  for  the 
use  of  telephone  exchanges  or  operating  units  held  as  a  whole  by  others 
under  some  form  of  lease. 


40 


311.  Miscellaneous  Rent  Revenue. 

•  This  account  should  include  the  revenues  accruing  to  the  company 
as  a  return  upon  rented  property  other  than  telephone  plant  and 
equipment,  held  by  others  under  lease,  as  provided  for  in  the  preceding 
account. 

Note— If  the  property  rented  is  so  intimately  connected  with  property  used  in  the  com¬ 
pany’s  telephone  operations  that  the  expenses  on  the  former  can  not  be  ascertained,  the 
revenues  should  be  credited  to  account  No.  505,  “Minor  Rents  of  Exchange  Plant,”  No.  515, 
“Minor  Rents  of  Toll  Plant,”  or  No.  524,  “Rents  from  Other  Operating  Property,”  as  may 
be  appropriate,  and  the  expenses  in  connection  with  the  rented  property  should  be  included 
in  the  operating  expenses. 

312.  Dividend  Revenues. 

This  account  should  include  dividends  declared  on  stocks  owned 
by  the  accounting  company  (and  held  in  its  treasury  or  deposited  in 
trust),  or  controlled  through  lease  or  otherwise,  the  income  from 
which  is  the  property  of  the  accounting  company.  Accruals  of  guar¬ 
anteed  dividends  may  be  included  in  this  account  if  their  payment  is 
reasonably  assured. 

Note  A — This  account, should  not  include  credits  for  dividends  on  stocks  issued  or  as¬ 
sumed  by  the  accounting  company  and  owned  by  it,  whether  held  in  its  treasury,  in  special 
deposits,  or  in  sinking  or  other  reserve  funds,  or  pledged  as  collateral. 

Note  B— Dividends  on  stocks  of  other  companies  held  in  sinking  or  other  reserve  funds 
should  not  be  included  in  this  account,  but  should  be  credited  to  account  No.  314,  “Sinking 
and  Other  Reserve  Fund  Accretions.” 

313.  Interest  Revenues. 

This  account  should  include  interest  on  funded  securities  of  other 
-companies  owned  by  the  accounting  company  (and  held  in  its  treasury 
or  deposited  in  trust),  or  controlled  through  lease  or  otherwise,  the 
income  from  which  is  the  property  of  the  accounting  company;  interest 
on  notes,  bank  balances,  and  open  accounts;  and  other  analogous  items 
including  discount  on  short-term  notes.  Interest  accrued  should  not  be 
credited  unless  its  payment  is  reasonably  assured  by  past  experience, 
guaranty,  anticipated  provision  or  otherwise.  In  other  cases  the  credit 
to  this  account  should  be  based  upon  the  interest  actually  collected. 

Note  A— This  account  should  not  include  interest  on  funded  securities  issued  or  assumed 
by  the  accounting  company  and  owned  by  it,  whether  held  in  its  treasury,  in  special  deposits, 
or  in  sinking  or  other  reserve  funds,  or  pledged  as  collateral. 

Note  B— Interest  on  funded  securities  of  other  companies  held  in  sinking  or  other  reserve 
funds  should  not  be  included  in  this  account,  but  in  account  No.  314,  “Sinking  and  Other 
Reserve  Fund  Accretions.” 

Note  C— At  the  option  of  the  company  there  may  be  included  in  this  account  the  por¬ 
tion  applicable  to  the  fiscal  period  of  the  amount  requisite  to  extinguish  (during  the  interval 
between  the  date  of  acquisition  and  the  date  of  maturity)  the  discount  or  premium  on  funded 
securities  of  other  companies  owned. 

314.  Sinking  and  Other  Reserve  Fund  Accretions. 

This  account  should  include  the  revenues  accruing  on  cash,  securi¬ 
ties,  and  other  assets  (other  than  securities  issued  or  assumed  by  the 
accounting  company)  in  the  hands  of  the  trustees  or  specifically  set 
aside  for  sinking  and  other  special  funds. 

Note  A — At  the  option  of  the  company  there  may  be  included  in  this  account  the  portion 
applicable  to  the  fiscal  period  of  the  amount  requisite  to  extinguish  (during  the  interval 
between  the  date  of  acquisition  and  the  date  of  maturity)  the  discount  or  premium  on  funded 
securities  of  other  companies  held  in  sinking  or  other  reserve  funds. 

Note  B— If  the  income  on  any  special  fund  is  retained  in  the  fund  and  if  the  fund  is  re¬ 
quired  to  be  represented  by  a  reserve,  the  amounts  credited  to  this  account  in  respect  to  such 
income  should  be  concurrently  charged  to  account  No.  350,  “Appropriations  of  Income  to 
Sinking  and  Other  Reserve  Funds,”  and  credited  to  account  No.  172,  “Surplus  Invested  in 
Sinking  Funds,”  or  other  appropriate  reserve  account. 

315.  Profits  from  Operations  of  Others. 

Whenever  in  accordance  with  the  terms  of  any  contract  the  com¬ 
pany  is  entitled  to  participate  in  the  profits  from  operations  of  others, 
all  revenues  accruing  to  the  company  from  such  source  should  be 
credited  to  this  account. 

Note — This  account  does  not  include  any  dividends  or  other  returns  upon  securities 
issued  by  such  separately  operating  companies,  nor  any  remuneration  for  services  or  the 
use  of  property  as  provided  for  in  account  No.  526,  “Licensee  Revenue — Cr.” 

316.  Miscellaneous  Non-operating  Revenues. 

This  account  should  include  all  non-operating  revenues  not  pro¬ 
vided  for  in  the  foregoing  accounts. 


41 


III.  NON-OPERATING  REVENUE  DEDUCTIONS 

320.  Rent  Expense. 

This  account  should  include  all  expenses  in  connection  with  rented 
property,  the  rents  of  which  are  included  in  account  No.  310  or  No. 
311,  such  as  the  cost  of  maintenance  when  borne  by  the  company,  the 
cost  of  negotiating  contracts,  advertising  for  tenants,  fees  paid  convey¬ 
ancers,  collector’s  commissions,  cost  of  enforcing  payment  of  rent,  cost 
of  ousting  tenants,  etc.  This  includes  the  expense  accruing  while  the 
property  is  idle  and  awaiting  an  occupant.  It  does  not  include  taxes. 

Note — If  the  property  rented  is  so  intimately  connected  with  property  used  in  the  com¬ 
pany’s  telephone  operations  that  the  expenses  on  the  former  can  not  be  ascertained,  they 
should  be  included  in  the  operating  expenses  and  the  revenue  should  be  credited  to  account 
No.  505,  “Minor  Rents  of  Exchange  Plant,”  No.  515,  “Minor  Rents  of  Toll  Plant,”  or  No.524, 
“Rents  from  Other  Operating  Property,”  as  may  be  appropriate. 

321.  Miscellaneous  Non-opeeating  Expense. 

This  account  should  include  all  expenses  in  connection  with  non¬ 
operating  revenue  other  than  the  expense  provided  for  in  account  No. 
320,  “Rent  Expense.”  This  account  should  include  all  expenses  in 
connection  with  procuring  interest  revenue,  dividend  revenue,  profits 
from  operations  of  others,  and  analogous  items.  It  does  not  include 
the  taxes  on  such  investments. 

322.  Non-operating  Taxes. 

This  account  should  include  all  taxes  payable  by  the  company 
accrued  upon  non-operating  property  and  all  taxes  assignable  to  non¬ 
operating  revenues.  (See  sec.  16,  p.  38.) 

323.  Uncollectable  Non-operating  Revenues. 

When  any  non-operating  revenues  are  judged  by  the  company  to  be 
uncollectible,  the  amount  thereof  should  be  credited  to  the  account  in 
which  theretofore  charged  and  charged  to  this  account. 


IV.  DEDUCTIONS  FROM  GROSS  INCOME 

330.  Rent  Deductions  for  Lease  of  Telephone  Plant. 

This  account  should  include  all  amounts  accrued  against  the  com¬ 
pany  for  rent  of  telephone  plant  and  equipment  which  it  holds  under 
some  form  of  lease  from  another,  and  of  which  for  operating  purposes 
it  has  the  exclusive  possession. 

This  account  is  intended  to  cover  only  rents  payable  for  the  use 
of  telephone  exchanges  or  operating  units  held  as  a  whole  under  some 
form  of  lease. 

331.  Rent  Deductions  for  Telephone  Offices. 

This  account  should  include  the  rents  payable  accruing  for  use  of 
general  offices  and  central  and  branch  telephone  offices  owned  by  others, 
excepting  rents  for  which  provisions  are  hereinafter  made  under 
“Clearing  accounts.”  (See  p.  61.) 

Note — Where  rent  payments  cover  services,  light,  heat,  etc.,  and  maintenance,  in  addi¬ 
tion  to  a  return  upon  investment,  an  apportionment  should  be  made  of  the  rent  payment  and 
the  amount  representing  interest  and  maintenance  (estimated,  if  not  known)  should  be 
charged  to  this  account,  the  balance  of  the  payment  being  charged  to  the  appropriate  expense 
accounts.  Where  repairs  of  rented  buildings  are  made  by  the  company,  the  cost  of  such 
repairs  should  be  charged  to  the  appropriate  operating  expense  or  other  accounts. 

332.  Rent  Deductions  for  Conduits,  Poles,  and  Other  Supports. 

This  account  should  include  the  rents  payable  accruing  for  the  use 
of  ducts,  conduits,  or  subways  owned  by  others  and  rents  for  the  use 
of  poles,  fences,  or  buildings  as  supports  for  the  telephone  lines  of  the 
accounting  company. 

333.  Rent  Deductions  for  Instruments  and  Equipment. 

This  account  should  include  the  rents  payable  accruing  for  tele¬ 
phone  instruments  and  equipment  owned  by  others. 

This  account  does  not  include  amounts  paid  licensor  telephone  com¬ 
panies  under  an  agreement  to  pay  a  certain  percentage  of  revenues 
for  use  of  instruments,  privilege  of  connection,  etc. 


42 


334.  Miscellaneous  Rent  Deductions. 

This  account  should  include  rents  payable  accrued  not  provided 
for  elsewhere. 

Note — Rent  of  tools,  equipment,  or  other  facilities  used  for  construction  should  not  be 
included  in  this  account,  but  in  the  appropriate  fixed  capital  account. 

335.  Interest  Deductions  for  Funded  Debt. 

This  account  should  include  all  interest  accrued  on  outstanding 
funded  debt  and  debenture  stock  issued  or  assumed  by  the  company. 
This  account  does  not  include  interest  on  securities  held  by  the  com¬ 
pany  in  its  treasury,  in  sinking  or  other  reserve  funds,  or  pledged  as 
collateral. 

Note  A — Interest  accruing  on  funded  securities  after  maturity  should  not  he  included 
in  this  account,  but  in  account  No.  336,  “Other  Interest  Deductions.” 

Note  B— If  any  of  the  funded  debt  securities  issued  or  assumed  by  the  company  are  held 
in  its  sinking  or  other  reserve  funds  and  the  interest  on  such  funded  debt  is  an  accretion  to 
the  fund,  the  interest  on  such  securities  should  not  be  charged  to  this  account,  but  an  amount 
equal  to  the  interest  on  the  funded  debt  so  held  should  be  charged  to  account  No.  350,  “Appro¬ 
priations  of  Income  to  Sinking  and  Other  Reserve  Funds.”  This  does  not  apply  to  securities 
carried  in  account  No.  127,  “Provident  Fund  Assets.” 

336.  Other  Interest  Deductions. 

This  account  should  include  all  interest  accrued  on  unfunded  debt, 
such  as  short-term  notes  payable  on  demand  or  having  dates  of  ma¬ 
turity  one  year  or  less  from  date  of  issue,  and  open  accounts  and  other 
analogous  items,  including  discount  on  short-term  notes;  also  interest 
accruing  on  funded  debt  securities  after  maturity  of  debt. 

337.  Loss  on  Operations  of  Others. 

Whenever,  in  accordance  with  the  terms  of  any  contract,  the  com¬ 
pany  is  bound  to  contribute  toward  reimbursement  of  the  losses  result¬ 
ing  from  the  operations  of  others,  all  liabilities  against  the  company 
accruing  from  such  source  should  be  charged  to  this  account. 

338.  Amortization  of  Debt  Discount  and  Expense. 

Charge  to  this  account  during  each  fiscal  period  the  proportion  of 
the  unamortized  discount  and  expense  on  outstanding  funded  debt  which 
is  applicable  to  the  period.  (See  sec.  7,  p.  13.) 

339.  Release  of  Premiums  on  Debt — Cr. 

Credit  to  this  account  during  each  fiscal  period  the  proportion  of 
the  premium  at  which  outstanding  funded  debt  was  issued  which  is 
applicable  to  the  period.  (See  sec.  7,  p.  13.) 

340.  Amortization  of  Landed  Capital. 

Charge  to  this  account  during  each  fiscal  period  such  portion  of 
the  original  money  cost  (estimated,  if  not  known)  of  landed  capital 
as  carried  in  account  No.  207,  “Right  of  Way,”  and  No.  211,  “Land,” 
as  is  necessary  to  cover  the  proportion  of  life  thereof  expired  during 
such  period. 

Note  A — The  amounts  charged  to  this  account  should  be  concurrently  credited  to  accoun 
No.  103,  “Reserve  for  Amortization  of  Intangible  Capital — Cr.” 

Note  B— When  any  landed  capital  expires  or  is  otherwise  retired  from  service  (as  e.  g., 
through  sale)  the  fixed  capital  account  or  investment  account,  if  any,  originally  charged 
therewith  should  be  credited  with  the  amount  originally  charged,  account  No.  103,  “Reserve 
for  Amortization  of  Intangible  Capital — Cr.,”  should  be  debited  with  all  amounts  theretofore 
credited  to  such  account  in  respect  of  such  capital  so  going  out  of  service;  the  appropriate 
account  should  be  debited  with  the  proceeds  of  sale,  if  any,  and  any  necessary  adjustment 
should  be  made  through  the  Corporate  Surplus  or  Deficit  account. 

341.  Miscellaneous  Deductions  from  Income. 

This  account  should  include  all  deductions  from  gross  income  which 
are  in  the  nature  of  fixed  charges  but  not  otherwise  provided  for,  such 
as  those  required  by  the  terms  of  some  contract,  agreement,  charter 
provision,  law,  or  ordinance.  Such  deduction  should  not  include  any 
appropriations  or  dispositions  of  income  that  rest  solely  in  the  dis¬ 
cretion  of  the  accounting  company. 

V.  DISPOSITION  OF  NET  INCOME 

350.  Appropriations  of  Income  to  Sinking  and  Other  Reserve  Funds. 

This  account  should  include  amounts  of  appropriations  of  income 
for  sinking  and  other  reserve  funds.  The  terms  of  mortgages,  deeds 


43 


of  trust,  or  other  contracts  providing  for  the  allocation  of  income  or 
for  the  payment  of  definite  sums  into  sinking  and  other  reserve  funds, 
and  for  accretions  to  such  funds  on  account  of  income  from  previous 
investments,  may  be  made  the  basis  of  such  appropriations. 

The  appropriations  for  payments  or  accretions  to  the  funds  may 
include  amounts  equal  to  (1)  direct  payments;  (2)  the  interest  or 
dividends  on  securities  issued  or  assumed  by  the  accounting  company 
and  held  in  such  funds;  (3)  the  income  from  investments  in  securities 
(other  than  those  issued  or  assumed  by  the  accounting  company)  held 
in  such  funds;  and  (4)  the  income  from  cash  and  other  property  held 
in  such  funds. 

Note  A— The  amounts  charged  to  this  account  should  be  concurrently  credited  to  account 
No.  172,  “Surplus  Invested  in  Sinking  Funds,”  or  other  appropriate  reserve. 

Note  B — If  appropriations  for  direct  payments  are  made  from  surplus,  they  should  be 
charged  to  account  No.  411,  “Appropriations  of  Surplus  to  Sinking  and  Other  Reserve  Funds.” 

'351.  Dividend  Appropriations  of  Income. 

This  account  should  include  dividends  on  outstanding  capital  stock 
issued  or  assumed  by  the  accounting  company  (other  than  that  held 
by  it),  if  declared  from  income. 

This  account  should  be  subdivided  so  as  to  show  separately  the 
dividends  on  the  various  classes  of  capital  stock. 

If  a  dividend  is  payable  in  any  thing  other  than  money,  such 
thing  should  be  described  in  the  entry  with  sufficient  particularity  to 
identify  it. 

Note  A — This  account  should  include  the  dividends  declared  out  of  income  on  all  classes 
of  capital  stock,  except  debenture  stock.  The  payments  on  debenture  stock  should  be  charged 
to  account  No.  335,  “Interest  Deductions  for  Funded  Debt.” 

Note  B— This  account  should  not  include  charges  for  dividends  on  capital  stock  issued 
or  assumed  by  the  accounting  company  and  owned  by  it,  whether  held  in  its  treasury,  in 
special  deposits,  or  in  sinking  or  other  reserve  funds,  or  pledged  as  collateral.  (See  account 
No.  350,  “Appropriations  of  Income  to  Sinking  and  Other  Reserve  Funds.”) 

Note  C— This  account  should  be  used  if  the  appropriations  are  definitely  made  as  charge¬ 
able  to  income.  If  similar  appropriations  are  made  from  surplus,  they  should  be  charged  to 
account'No.  412,  “Dividend  Appropriations  of  Surplus.” 

352.  Appropriations  of  Income  for  Construction,  Equipment,  and  Bettert 

MENTS. 

This  account  should  include  amounts  appropriated  from  income  for 
construction  and  equipment  and  for  betterments  of  property  carried 
in  fixed  capital  accounts. 

These  amounts  should  be  subdivided  so  as  to  show — (a)  amounts 
expended  during  preceding  fiscal  periods,  (ft)  amounts  expended  during 
the  current  fiscal  period,  and  (c)  amounts  held  in  reserve. 

Note — This  account  should  be  used  if  the  appropriations  are  definitely  made  as  chargeable 
to  income.  If  similar  appropriations  are  made  from  surplus,  they  should  be  charged  to  account 
No.  415,  “Appropriations  of  Surplus  for  Construction,  Equipment  and  Betterments.” 

353.  Miscellaneous  Appropriations  of  Income. 

This  account  should  include  appropriations  of  income  not  provided 
for  elsewhere. 

Note — This  account  should  be  used  if  the  appropriations  are  definitely  made  as  charge¬ 
able  to  income.  If  similar  appropriations  are  made  from  surplus,  they  should  be  charged 
to  account  No.  416,  “Miscellaneous  Appropriations  of  Surplus.” 


CORPORATE  SURPLUS  OR  DEFICIT  ACCOUNT 


I.  CREDITS 

Balance  (at  beginning  of  fiscal  period).  page 

400.  Credit  Balance  Transferred  from  Income  Account .  45 

401.  Miscellaneous  Additions  to  Surplus  .  45 


Balance  Debit  (at  end  of  fiscal  period)  Carried  to  Balance  Sheet. 


II.  DEBITS 

Balance  (at  beginning  of  fiscal  period). 

410.  Debit  Balance  Transferred  from  Income  Account  .  45 

411.  Appropriations  of  Surplus  to  Sinking  and  Other  Reserve  Funds  ...  45 

412.  Dividend  Appropriations  of  Surplus .  45 

413.  Realized  Depreciation  not  Covered  by  Reserves .  46 

414.  Amortization  Unprovided  for  Elsewhere .  46 

415.  Appropriations  of  Surplus  for  Construction,  Equipment  and  Better¬ 

ments  .  46 

416.  Miscellaneous  Appropriations  of  Surplus .  46 

417.  Other  Deductions  from  Surplus . 46 

Balance  Credit  (at  end  of  fiscal  period)  Carried  to  Balance  Sheet. 


INSTRUCTIONS  PERTAINING  TO  CORPORATE  SURPLUS  OR  DEFICIT 

ACCOUNT 

17.  Corporate  surplus  or  deficit  account  defined. — This  account  or 
summary  is  the  connecting  link  between  the  Income  Account  and  the  Bal¬ 
ance  Sheet.  It  summarizes  the  changes  in  the  corporate  surplus  or  deficit 
during  a  given  fiscal  period  resulting  from  the  operations  and  the  business 
transactions  during  that  period,  as  well  as  those  effected  by  any  disposition 
of  net  profits  made  solely  at  the  option  of  the  company  by  accounting  ad¬ 
justments  not  properly  attributable  to  the  period,  or  by  miscellaneous  losses 
or  gains  not  provided  for  elsewhere.  The  corporate  surplus  or  deficit  should 
be  shown  on  the  balance-sheet  statement  under  account  No.  137,  “Corporate 
Deficit,”  or  No.  174,  “Corporate  Surplus  Unappropriated.” 


45 


TEXT  EXPLANATORY  OF  CORPORATE  SURPLUS  OR  DEFICIT 

ACCOUNT 


I.  CREDITS 

400.  Credit  Balance  Transferred  from  Income  Account. 

Under  this  title  should  be  shown  the  amount  of  net  income  brought 
forward  from  the  Income  Account. 

401.  Miscellaneous  Additions  to  Surplus. 

This  account  should  include  amounts  (not  provided  for  elsewhere) 
transferred  to  Surplus  from  other  accounts  and  amounts  representing 
increases  in  resources  not  properly  assignable  to  the  income  of  the 
fiscal  period  for  which  the  accounts  are  stated.  Among  the  items  which 
should  be  credited  to  this  account  are,  for  example — 

Adjustment  or  cancellation  of  old  balance-sheet  accounts  (other 
than  fixed  capital). 

Profits  derived  from  the  sale  of  property  carried  in  account  No.  Ill, 
“Miscellaneous  Investments.” 

Credits  resulting  from  adjustments  required  to  bring  to  par  securi¬ 
ties  issued  or  assumed  by  the  accounting  company  and  reacquired  at  a 
cost  less  than  the  par  value. 

Premium  on  capital  stock  at  the  time  of  its  retirement. 

Unextinguished  premiums  on  funded  debt  retired  before  maturity. 


II.  DEBITS 

410.  Debit  Balance  Transferred  from  Income  Account. 

Under  this  title  should  be  shown  the  amount  of  net  loss  brought 
forward  from  the  Income  Account. 

411.  Appropriations  of  Surplus  to  Sinking  and  Other  Reserve  Funds. 

This  account  should  include  amounts  of  appropriations  of  surplus 
for  sinking  and  other  reserve  funds.  The  terms  of  mortgages,  deeds 
of  trust,  or  other  contracts  providing  for  the  allocation  of  surplus  or 
for  the  payment  of  definite  amounts  into  sinking  and  other  reserve 
funds  may  be  made  the  basis  of  such  appropriations. 

Note  A — This  account  should  be  used  if  the  appropriations  are  definitely  made  as  charge¬ 
able  to  surplus.  If  similar  appropriations  are  made  from  income,  they  should  be  charged  to 
account  No.  350,  “Appropriations  of  Income  to  Sinking  and  Other  Reserve  Funds.” 

Note  B — If  appropriations  are  made  to  cover,  the  income  accruing  on  sinking-fund  assets 
and  to  cover  amounts  equivalent  to  interest  on  securities  issued  or  assumed  by  the  accounting 
company  and  held  in  such  funds,  the  amounts  of  such  appropriations  should  not  be  included 
in  this  account,  but  should  be  included  in  account  No.  350,  “Appropriations  of  income  to 
Sinking  and  Other  Reserve  Funds.  ”  If  appropriations  are  made  to  cover  sums  equivalent 
to  dividends  on  stock  issued  or  assumed  by  the  accounting  company  and  held  in  such  funds, 
the  amounts  of  such  appropriations  may  be  included  in  this  account  or  in  account  N  o.  350, 
according  as  the  dividend  is  declared  from  surplus  or  from  income. 

Note  C — The  amounts  charged  to  this  account  should  be  concurrently  credited  to  balance- 
sheet  account  No.  172,  “Surplus  Invested  in  Sinking  Funds,”  or  other  appropriate  reserve 
accounts. 

412.  Dividend  Appropriations  of  Surplus. 

This  account  should  include  dividends  on  outstanding  capital  stock 
issued  or  assumed  by  the  accounting  company  (other  than  that  held 
by  it),  if  declared  from  surplus. 

This  account  should  be  subdivided  so  as  to  show  separately  the 
dividends  on  the  various  classes  of  capital  stock. 


46 


If  a  dividend  is  payable  in  any  thing  other  than  money,  such 
thing  should  be  described  in  the  entry  with  sufficient  particularity  to 
identify  it. 

Note  A— This  account  includes  the  dividends  declared  from  surplus  on  all  classes  of 
capital  stock  except  debenture  stock.  The  payments  on  debenture  stock  should  be  charged 
to  account  No.  335,  “Interest  Deductions  for  Funded  Debt.” 

Note  B— This  account  should  not  include  charges  for  dividends  on  capital  stock  issued 
or  assumed  by  the  accounting  company  and  owned  by  it,  whether  held  in  its  treasury,  in 
special  deposits,  or  sinking  or  other  reserve  funds,  or  pledged  as  collateral.  (See  account 
No.  411,  “Appropriations  of  Surplus  to  Sinking  and  Other  Reserve  Funds.”) 

Note— This  account  should  be  used  if  appropriations  are  definitely  made  as  chargeable 
to  surplus.  If  similar  appropriations  are  made  from  income,  they  should  be  charged  to  account 
No.  351,  “Dividend  Appropriations  of  Income.” 

413.  Realized  Depreciation  not  Covered  by  Reserves. 

Charge  to  this  account  the  realized  depreciation  (i.  e.,  the  difference 
between  the  original  cost  and  the  salvage,  if  any)  on  tangible  fixed 
capital  retired,  if  such  depreciation  has  not  been  provided  for  through 
a  depreciation  reserve.  This  includes  such  portion  of  the  realized 
depreciation  on  any  physical  property  which  was  installed  prior  to  the 
period  for  which  the  reserve  was  established  as  is  due  to  life  in  service 
before  that  period.  This  portion  may  be  estimated  on  the  basis  of  the 
proportion  which  the  life  in  service  of  the  property  in  question  prior  to 
the  period  for  which  the  reserve  was  established  bears  to  its  entire 
life  in  service.  (See  sec.  23,  p.  53.) 

414.  Amortization  Unprovided  for  Elsewhere. 

Charge  to  this  account,  when  any  intangible  property  expires  or 
is  relinquished,  such  portion  of  its  cost  as  has  not  been  previously 
written  off  or  is  not  covered  by  account  No.  103,  “Reserve  for  Amorti¬ 
zation  of  Intangible  Capital— Cr.”  Charge  also  to  this  account  all  op¬ 
tional  amortization,  such  as  that  of  assets  carried  in  accounts  No.  201, 
“Organization,”  and  No.  204,  “Other  Intangible  Capital.” 

415.  Appropriations  of  Surplus  for  Construction,  Equipment,  and  Better¬ 

ments. 

This  account  should  include  amounts  appropriated  from  surplus 
for  construction  and  equipment  and  for  betterments  of  property  carried 
in  the  fixed  capital  accounts. 

These  amounts  should  be  subdivided  so  as  to  show  (a)  amounts 
expended  during  preceding  fiscal  period,  (&)  amounts  expended  during 
the  current  fiscal  period,  and  (c)  amounts  held  in  reserve. 

Note— This  account  should  be  used  if  appropriations  are  definitely  made  as  chargeable 
to  surplus.  If  similar  appropriations  are  made  from  income,  they  should  be  charged  to  account 
No.  352,  “Appropriations  of  Income  for  Construction,  Equipment  and  Betterments.” 

416.  Miscellaneous  Appropriations  of  Surplus. 

This  account  should  include  appropriations  of  surplus  not  provided 
for  elsewhere. 

Note— This  account  should  be  used  when  the  appropriations  are  definitely  made  as 
chargeable  to  surplus.  If  similar  appropriations  are  made  from  income,  they  should  be  charged 
to  account  No.  353,  “Miscellaneous  Appropriations  of  Income.” 

417.  Other  Deductions  from  Surplus. 

This  account  should  include  amounts  (not  provided  for  elsewhere) 
transferred  from  Surplus  to  other  accounts,  amounts  written  off  in 
consequence  of  adjustments,  and  payments  not  properly  chargeable  to 
Income  for  the  fiscal  period  for  which  the  accounts  are  stated.  Among 
the  items  which  should  be  charged  to  this  account  are,  for  example: 

Adjustment  or  cancellation  of  old  balance-sheet  accounts  (other 
than  fixed  capital). 

Losses  resulting  from  the  sale,  destruction,  or  retirement  of  prop¬ 
erty  carried  in  account  No.  Ill,  “Miscellaneous  Investments.” 

Losses  resulting  from  adjustments  required  to  bring  to  par  securi¬ 
ties  issued  or  assumed  by  the  accounting  company  and  reacquired  at 
a  cost  exceeding  the  par  value. 

Deductions  made  to  extinguish  discount  on  capital  stock. 

Deductions  made  to  amortize  debt  discount  and  expense  when  not 
properly  chargeable  to  income. 

Note— A  complete  analysis  of  this  account  will  be  required  in  annual  reports  of  the  com¬ 
pany  to  the  Commission. 


47 


OPERATING  REVENUE  ACCOUNTS 

I.  EXCHANGE  SERVICE  REVENUES 

PAGE 


500.  Subscribers’  Station  Revenues  .  48 

501.  Public  Pay  Station  Revenues  .  48 

502.  Miscellaneous  Exchange  Service  Revenues .  48 

503.  Service  Stations  . . .  48 

504.  Private  Exchange  Lines .  48 

505.  Minor  Rents  of  Exchange  Plants .  48 

506.  Other  Exchange  Revenues .  48 

II.  TOLL  SERVICE  REVENUES 

510.  Message  Tolls  .  49 

511.  Miscellaneous  Toll  Line  Revenues .  49 

512.  Leased  Toll  Lines  .  49 

513.  Telegraph  Tolls  . . . .  49 

514.  Telegraph  Service  on  Toll  Lines .  49 

515.  Minor  Rents  of  Toll  Plant .  49 

516.  Other  Toll  Line  Revenues  . : .  49 

III.  MISCELLANEOUS  OPERATING  REVENUES 

520.  Messenger  Service  .  50 

521.  Telegraph  Commissions  . 50 

522.  Other  Telegraph  Service  Charges .  50 

523.  Advertising  and  Directory .  50 

524.  Rents  from  Other  Operating  Property . 50 

525.  Other  Miscellaneous  Revenue .  50 

526.  Licensee  Revenue — Cr .  50 

527.  Licensee  Revenue — Dr . 50 


INSTRUCTIONS  PERTAINING  TO  OPERATING  REVENUE  ACCOUNTS 

18.  Operating  revenues  defined. — By  operating  revenues  are  meant  all 
amounts  of  money  which  the  company  receives  or  becomes  lawfully  en¬ 
titled  to  recover  for  services  rendered  and  as  a  return  upon  property  used 
by  the  company  in  its  own  operations.  Credits  to  the  various  revenue 
accounts  should  be  based  upon  the  gross  charges  made  for  services  rendered 
by  the  company. 

19.  Deductions  from  revenues. — Discounts  allowed  subscribers  for 
prompt  payment,  corrections  of  overcharges,  overcollections  theretofore 
credited  and  afterwards  corrected,  authorized  refunds  on  account  of  failures 
in  transmission,  and  other  corrections  should  be  charged  to  the  revenue 
account  to  which  they  relate. 

20.  Commissions. — Commissions  paid  to  attendants  at  pay  stations  and 
to  employees  or  others  in  lieu  of  salaries  should  be  charged  to  appropriate 
expense  accounts  and  not  to  the  revenue  accounts. 


48 


TEXT  EXPLANATORY  OF  OPERATING  REVENUE  ACCOUNTS 


I.  EXCHANGE  SERVICE  REVENUES 

500.  Subscribers  Station  Revenues. 

This  account  should  include  all  revenues  from  subscribers  for  ex¬ 
change  service,  extension  stations,  private  branch  exchanges,  and  other 
exchange  service  stations,  whether  the  charge  is  based  upon  a  flat 
rate  or  measured  rate.  Include  in  this  account,  also,  charges  made  for 
the  insertion  of  extra  names  in  directory  and  for  use  of  extra  exchange 
mileage  in  circuits  to  subscribers’  stations,  installation  and  cancellation 
charges,  and  any  commissions  on  telegraph  tolls  received  in  lieu  of  rent 
for  exchange  lines. 

501.  Public  Pay  Station  Revenues. 

This  account  should  include  all  revenues  from  exchange  service  at 
public  pay  stations.  This  account  should  not  include  revenues  from 
regular  subscribers’  stations  having  measured  service  or  coin  box 
service  at  standard  rates.  The  amount  credited  to  this  account  should 
be  the  gross  amount  collected  or  due  at  tariff  rates;  commissions 
allowed  attendants  or  others  for  pay  station  tolls  should  be  debited 
to  account  No.  648,  “Pay  Station  Commissions,”  and  not  to  this  account. 

502.  Miscellaneous  Exchange  Service  Revenues. 

This  account  should  include  all  revenues  derived  from  exchange 
service  other  than  from  subscribers’  stations  or  public  pay  stations, 
as  provided  for  in  the  following  subaccounts: 

503.  Service  Stations. 

This  account  should  include  switching  charges  and  other  revenues 
derived  from  stations,  the  lines  and  equipments  for  which  are  owned 
wholly  or  in  part  by  others,  but  to  which  the  accounting  company 
furnishes  exchange  service. 

504.  Private  Exchange  Lines. 

This  account  should  include  all  revenues  derived  from  telephone 
lines,  equipment,  and  instruments  forming  part  of  the  company’s  ex¬ 
change  plant  and  leased  to  others  for  use  as  private  lines  but  without 
exchange  connections  with  other  subscribers. 

505.  Minor  Rents  of  Exchange  Plant. 

This  account  should  include  all  revenues  derived  from  attach¬ 
ments  to  exchange  poles,  the  use  of  exchange  conduits,  and  other  minor 
rents  from  exchange  plant  where  such  property  is  maintained  by  the 
accounting  company,  and  the  cost  of  such  maintenance  can  not  be 
separated  from  the  expense  of  maintaining  the  rented  property.  This 
account  should,  not  include  rents  for  equipment  leased  to  licensees 
under  an  arrangement  for  a  division  of  revenues  as  provided  for  in 
account  No.  526,  “Licensee  Revenue — Cr.” 

506.  Other  Exchange  Revenues. 

This  account  should  include  all  exchange  service  revenues  not 
provided  for  elsewhere. 


49 


II.  TOLL  SERVICE  REVENUES 

510.  Message  Tolls. 

This  account  should  include  all  revenues  derived  from  messages 
transmitted  wholly  over  the  company’s  lines  between  stations  in  dif¬ 
ferent  exchange  areas  and  for  which  a  charge  is  made  that  is  not  in¬ 
cluded  in  contracts  with  subscribers  for  station  service;  also  the 
accounting  company’s  proportion  of  tolls  on  messages  transmitted  by 
the  joint  use  of  its  own  and  other  lines. 

511.  Miscellaneous  Toll  Line  Revenues. 

This  account  should  include  all  toll  service  revenues  (other  than 
message  tolls),  as  provided  for  in  the  following  subaccounts: 

512.  Leased  Toll  Lines. 

This  account  should  include  all  revenues  derived  from  toll  lines 
(including  the  terminal  exchange  circuits)  leased  by  others  under  con¬ 
tracts  giving  exclusive  telephone  use  either  continuously  or  during 
stated  periods.  Such  plant  may  be  leased  in  connection  with  private 
branch  exchange  or  private  exchange  line  installations. 

Note — Revenues  from  private  branch  exchanges  or  private  lines,  the  contracts  for  which 
provide  for  the  use  of  toll  circuits,  should  be  divided  (by  estimate,  if  necessary)  between 
Exchange  Revenue  and  Toll  Revenue. 

513.  Telegraph  Tolls. 

This  account  should  include  all  revenues  received  from  telegraph 
companies  for  the  use  of  toll  lines  for  telephoning  telegrams  and 
cablegrams. 

514.  Telegraph  Service  on  Toll  Lines. 

This  account  should  include  all  revenues  derived  from  the  use  of 
toll  lines  for  telegraph  circuits,  whether  such  lines  are  used  by  tele¬ 
graph  companies,  brokers,  or  others. 

515.  Minor  Rents  of  Toll  Plant. 

This  account  should  include  all  revenues  derived  from  attachments 
to  toll  poles,  the  use  of  toll  conduits,  and  other  minor  rents  from  toll 
plant  where  such  property  is  maintained  by  the  accounting  company, 
and  the  cost  of  such  maintenance  can  not  be  separated  from  expense 
of  maintaining  the  rented  property.  This  account  should  not  include 
rents  from  equipment  leased  to  licensees  under  an  arrangement  for  a 
division  of  revenues  as  provided  for  in  account  No.  526,  “Licensee 
Revenue — Cr.” 

516.  Other  Toll  Line  Revenues. 

This  account  should  include  all  toll  line  revenues  not  provided 
for  elsewhere. 


— 4  P  U  Teleph  A  and  B 


50 


III.  MISCELLANEOUS  OPERATING  REVENUES 

520.  Messenger  Service. 

This  account  should  include  all  revenues  derived  from  messenger 
service. 

521.  Telegraph  Commissions. 

This  account  should  include  all  commissions  receivable  for  the 
collection  of  telegraph  and  cable  tolls  on  messages  transmitted  between 
telegraph  offices  and  their  patrons  and  upon  which  the  accounting 
company  undertakes  to  make  collection. 

522.  Other  Telegraph  Service  Charges. 

This  account  should  include  all  revenues  (not  classed  as  telegraph 
commissions  or  telegraph  tolls)  received  from  telegraph  companies  for 
services  rendered  by  the  telephone  company’s  employees  in  joint  tele¬ 
phone  offices  in  connection  with  telegraph  and  cable  messages,  such, 
for  example,  as  receiving  messages  from  the  public  and  quoting  rates. 

523.  Advertising  and  Directory. 

This  account  should  include  all  revenues  derived  from  advertising 
in  directories  and  elsewhere. 

524.  Rents  from  Other  Operating  Property. 

This  account  should  include  all  revenues  accruing  from  the  rent  of 
buildings  and  other  property  (except  leased  wires,  poles,  conduits,  and 
equipment  covered  by  accounts  No.  505,  “Minor  Rents  of  Exchange 
Plant,”  and  No.  515,  “Minor  Rents  of  Toll  Plant,”),  when  such  property 
is  used  also  by  the  company  and  the  expense  of  maintaining  and  oper¬ 
ating  the  rented  portion  can  not  be  separated  from  the  total  expense. 

525.  Other  Miscellaneous  Revenue. 

This  account  should  include  all  miscellaneous  operating  revenues 
not  provided  for  elsewhere.  This  account  does  not  include  non-operating 
revenue  as  provided  for  in  accounts  Nos.  310  to  316,,  inclusive. 

526.  Licensee  Revenue — Cr. 

When  a  telephone  company  grants  to  another  telephone  company 
the  use  of  its  patents  or  furnishes  instruments  and  equipment  and 
general  supervision  under  an  agreement  for  apportioning  the  revenues 
of  the  licensee,  the  proportion  accruing  to  the  licensor  should  be  in¬ 
cluded  by  the  licensor  in  this  account. 

527.  Licensee  Revenue — Dr. 

When  a  telephone  company  is  granted  by  another  telephone  com¬ 
pany  the  use  of  its  patents,  or  is  furnished  instruments  and  equipment 
and  general  supervision  under  an  agreement  for  apportioning  the 
revenues  of  the  licensee,  the  proportion  accruing  to  the  licensor  should 
be  included  by  the  licensee  in  this  account. 


51 


OPERATING  EXPENSE  ACCOUNTS 

I.  MAINTENANCE  EXPENSES 

PAGE 

601.  Supervision  of  Maintenance  .  55 

602.  Repairs  of  Aerial  Plant .  55 

603.  Repairs  of  Underground  Plant  .  55 

604.  Repairs  of  Central  Office  Equipment .  55 

605.  Repairs  of  Station  Equipment .  55 

606.  Repairs  of  Buildings  and  Grounds .  56 

607.  Station  Removals  and  Changes .  56 

608.  Depreciation  of  Plant  and  Equipment .  56 

609.  Extraordinary  Depreciation  .  56 

610.  Other  Maintenance  Expenses  .  56 

611.  Repairs  Charged  to  Reserves — Cr .  56 

II.  TRAFFIC  EXPENSES 

620.  Central  Office  Superintendence .  57 

621.  Traffic  Superintendence .  57 

622.  Service  Inspection .  57 

623.  Clerical  Operating  Wages  .  57 

624.  Operators’  Wages  .  57 

625.  Central  Office  Supplies  and  Expenses .  57 

626.  Rest  and  Lunch  Rooms .  57 

627.  Operators'  Schooling .  57 

628.  Transmission  Power .  57 

629.  Central  Office  Stationery  and  Printing .  57 

630.  Messenger  Service .  57 

631.  Miscellaneous  Central  Office  Expenses .  58 

632.  Pay  Station  Expenses .  58 

633.  Other  Traffic  Expenses .  58 

III.  COMMERCIAL  EXPENSES 

640.  Commercial"  Administration  .  58 

641.  Promotion  Expenses .  58 

642.  Advertising  . 58 

643.  Canvassing  .  58 

644.  Sublicensee  Relations .  58 

645.  Collection  Expenses  .  58 

646.  Revenue  Accounting  .  58 

647.  Revenue  Collecting  .  59 

648.  Pay  Station  Commissions  .  59 

649.  Directory  Expenses  .  59 

650.  Other  Commercial  Expenses .  59 

IV.  GENERAL  AND  MISCELLANEOUS  EXPENSES 

660.  General  Office  Salaries  .  59 

661.  Salaries  of  General  Officers .  59 

662.  Salaries  of  General  Office  Clerks  .  59 

663.  General  Office  Supplies  and  Expenses .  59 

664.  Expenses  of  General  Officers  and  Clerks .  59 

665.  General  Office  Stationery  and  Printing .  59 

666.  Other  General  Office  Supplies  and  Expenses .  59 

667.  General  Law  Expenses .  59 

668.  Insurance  . 60 

669.  Accidents  and  Damages  .  60 

670.  Law  Expenses  Connected  with  Damages .  60 

671.  Miscellaneous  General  Expenses .  60 

672.  Relief  Department  and  Pensions  .  60 

673.  Telephone  Franchise  Requirements .  60 

674.  Amortization  of  Franchises  and  Patents .  60 

675.  Other  General  Expenses  .  61 

676.  Telephone  Franchise  Requirements — Cr .  61 


52 


INSTRUCTIONS  PERTAINING  TO  OPERATING  EXPENSE  ACCOUNTS 

21.  Repairs  defined. — Repairs,  as  used  in  the  text  of  the  various  oper¬ 
ating  expense  accounts,  includes  ordinary  and  extraordinary  repairs. 

Ordinary  repairs  include: 

(a)  Testing  for,  locating,  and  clearing  crosses,  breaks,  grounds,  and 
other  line  troubles,  including  routine  work  intended  to  prevent  such 
troubles,  as,  for  example,  pulling  up  slack,  tightening  guys  and  resetting 
guy  stubs,  trimming  trees,  straightening  poles  and  cross  arms,  and  cleaning 
and  adjusting  apparatus; 

(b)  Replacements  of  minor  or  short-lived  parts  of  structures,  equip¬ 
ment,  or  facilities; 

(c)  Replacements  of  minor  parts  of  wire  plant  or  equipment  made 
necessary  by  reason  of  faulty  adjustments,  excessive  strains,  mechanical 
injuries,  or  other  minor  casualties,  not  provided  against  in  the  charge  for 
depreciation  of  plant  and  equipment; 

(d)  Rearrangements  and  changes  in  location  of  plant,  except  sub¬ 
scribers’  station  equipment  (for  which  a  special  account  is  provided).  This 
includes  rearrangements  of  circuits,  reassociation  of  party  lines,  rearranging 
grouping  of  trunks  and  calling  circuits,  recross  connecting  on  distributing 
frames,  rerunning  jumper  wires,  underlining  switchboard  jacks,  etc., 
together  with  materials  used  for  such  purposes  which  do  not  add  to  the 
tangible  value  of  such  plant; 

(e)  Recovering  salvage  and  removing  retired  or  abandoned  property; 
(except  subscribers’  station  equipment)  when  such  costs  are  not  provided 
for  by  the  depreciation  reserve. 

Ordinary  repairs  are  not  required  to  be  taken  into  account  in  fixing  a 
rate  of  depreciation. 

Extraordinary  repairs  include: 

( a )  Restoring  to  an  efficient  or  proper  condition  buildings,  structures, 
or  other  units  of  property  which  have  deteriorated; 

(b)  Substituting,  in  order  to  maintain  normal  efficiency,  new  parts 
for  old  parts  of  continuous  structures,  such  as  pole  lines,  cables,  wires, 
conduits,  etc.,  where  such  substitutions  do  not  amount  to  a  practical 
replacement  of  any  considerable  length  of  such  continuous  structures; 

(c)  Restoring  the  condition  of  property  damaged  by  storms,  floods, 
fire,  or  other  casualties. 

(d)  Recovering  salvage  and  removing  retired  or  abandoned  property 
in  connection  with  above  work. 

Extraordinary  repairs  should  be  provided  for  by  adequate  charges  to 
depreciation. 

When  it  is  necessary  substantially  to  reconstruct  or  to  replace  a  major 
portion  of  any  unit  of  property  or  any  important  section  of  a  continuous 
structure,  the  cost  should  be  handled  through  the  capital  accounts;  that  is, 
the  cost  of  the  property  removed  or  replaced  should  be  credited  to  the 
appropriate  fixed  capital  accounts  and  the  new  property  should  be  charged 
thereto. 

All  repairs,  whether  ordinary  or  extraordinary,  should  be  charged  to 
the  appropriate  primary  operating  expense  accounts.  Extraordinary  repairs 
for  which  a  reserve  has  been  provided  should  then  be  concurrently  charged 
to  account  No.  102,  “Reserve  for  Accrued  Depreciation — Cr.,”  and  credited 
to  account  No.  611,  “Repairs  Charged  to  Reserves — Cr.” 

22.  Cost  of  repairs. — The  cost  of  repairs,  as  used  in  the  text  of  the 
various  operating  expense  accounts,  should  be  understood  to  include  the 
wages,  salaries,  and  fees  paid  employees  directly  engaged  in  the  work  of 
repairs,  personal  expenses  of  such  employees  when  borne  by  the  company, 


53 


and  the  cost  of  materials  and  supplies  consumed  and  the  expenses  of  facil¬ 
ities  employed  in  making  the  repairs  less  the  value  of  any  salvage  recovered. 
It  includes  also  the  cost  of  direct  supervision,  such  as  of  foreman  or  super¬ 
intendents  of  repair  gangs,  but  does  not  include  the  cost  of  general  super¬ 
vision  as  provided  for  in  account  No.  601,  “Supervision  of  Maintenance.” 

23.  Depreciation  of  plant  and  equipment. — Telephone  companies  should 
include  in  operating  expenses  depreciation  charges  for  the  purpose  of 
creating  proper  and  adequate  reserves  to  cover  the  expenses  of  deprecia¬ 
tion  currently  accruing  in  the  tangible  fixed  capital.  By  expense  of  depre¬ 
ciation  is  meant — 

(а)  The  losses  suffered  through  the  current  lessening  in  value  of 
tangible  property  from  wear  and  tear  (not  covered  by  current  repairs). 

(б)  Absolescence  or  inadequacy  resulting  from  age,  physical  change, 
or  supersession  by  reason  of  new  inventions  and  discoveries,  changes  in 
popular  demand,  or  public  requirements,  and 

(c)  Losses  suffered  through  destruction  of  property  by  extraordinary 
casualties. 

The  amount  charged  as  expense  of  depreciation  should  be  based  upon 
rules  determined  by  the  accounting  company.  Such  rules  may  be  derived 
from  a  consideration  of  the  company’s  history  and  experience.  Companies 
should  be  prepared  to  furnish  the  Commission,  upon  demand,  the  rules  and 
a  sworn  statement  of  the  facts,  expert  opinions,  and  estimates  upon  which 
they  are  based. 

The  estimate  for  depreciation  of  physical  property  should  take  into 
account — 

(а)  The  gradual  deterioration  and  ultimate  retirement  of  units  of 
property  which  may  be  satisfactorily  individualized,  such  as  buildings, 
machines,  valuable  instruments,  etc.,  to  the  end  that  by  the  time  such  units 
of  property  go  out  of  service  there  shall  have  been  accumulated  a  reserve 
equal  to  the  original  money  cost  of  such  property  plus  expenses  incident  to 
retirement  less  the  value  of  any  salvage. 

(б)  The  depreciation  accruing  in  property  which  can  not  be  readily 
individualized,  such  as  pole  lines,  wires,  cables,  or  other  continuous  struc¬ 
tures,  where  expenditures  for  repairs  or  replacements  of  individual  parts 
ordinarily  are  not  actually  made  until  the  later  years  of  the  life  in  service 
of  such  property,  and  when  made  may,  therefore,  be  classed  as  extraordinary 
repairs. 

The  rate  of  depreciation  should  be  fixed  so  as  to  distribute,  as  nearly 
as  may  be,  evenly  throughout  the  life  of  the  depreciating  property  the 
burden  of  repairs  and  the  cost  of  capital  consumed  in  operations  during  a 
given  month  or  year,  and  should  be  based  upon  the  average  life  of  the  units 
comprised  in  the  respective  classes  of  property. 

The  amount  estimated  to  cover  the  expense  of  depreciation  of  fixed 
capital  should  be  charged  monthly  to  account  No.  608,  “Depreciation  of 
Plant  and  Equipment”  (or  to  the  appropriate  clearing  account  or  accounts), 
and  concurrently  credited  to  account  No.  102,  “Reserve  for  Accrued  Depre¬ 
ciation — Cr.” 

Account  No.  413,  “Realized  Depreciation  not  Covered  by  Reserves,” 
is  provided  in  the  Corporate  Surplus  or  Deficit  account  for  charges  for 
realized  depreciation  on  tangible  fixed  capital  retired  when  such  deprecia¬ 
tion  occurred  prior  to  the  establishment  of  account  No.  102,  “Reserve  for 
Accrued  Depreciation — Cr.,”  or  has  not  been  provided  for  by  credits  to 
that  account. 

24.  Extraordinary  casualties  and  unanticipated  reconstruction. — If  so 
authorized,  upon  application  to  the  Commission,  the  company  granted  such 
authority  may  charge  the  amount  named  in  the  authorization  to  a  suspense 
account  for  the  purpose  of  distributing  over  a  limited  period  an  extraor¬ 
dinary  loss  of  such  a  nature  that  it  can  not  be  anticipated  by  the  exercise 
of  reasonable  prudence.  Losses  of  this  sort  may  be  due  to  the  requirements 
by  lawful  authority  or  public  necessity  of  improvements  involving  the 
abandonment  of  a  considerable  portion  of  plant  and  equipment  before  it 
has  attained  its  normal  life  in  service,  or  to  an  extraordinary  casualty 
entirely  unforseen  and  unprovided  for.  The  original  cost  of  the  property  so 


54 


abandoned  or  destroyed  should  be  credited  to  the  fixed  capital  accounts  in 
which  it  was  carried,  and  such  portion  of  the  cost  as  may  be  authorized  by 
the  Commission  may  be  charged  to  the  suspense  account,  the  remainder 
of  the  cost,  less  any  salvage,  being  charged  out  as  elsewhere  provided  in 
case  of  retirements  of  property.  The  suspense  account  so  raised  should  be 
credited  and  account  No.  609,  “Extraordinary  Depreciation,”  debited 
monthly  with  such  an  amount  as  will,  through  its  regular  application, 
amortize  the  amount  of  the  loss  at  the  end  of  the  period  designated. 

All  ordinary  casualties  (those  which  occur  with  such  frequency  that 
the  principles  of  insurance  are  applicable  thereto)  should  be  provided  for 
through  an  insurance  reserve  maintained  for  such  losses  or  be  included 
in  the  provision  for  depreciation  of  plant  and  equipment. 

25.  Joint  operating  expenses. — When  any  operating  expense  is  incurred 
by  the  accounting  company  for  the  joint  benefit  of  itself  and  others  under 
an  agreement  for  apportioning  such  expenses  the  company  charging  such 
expenses  to  others  should  credit  such  amounts  to  its  primary  expense 
accounts  to  which  the  expenses  were  charged  when  incurred.  The  debtor 
company  should  charge  the  amounts  so  billed  to  its  primary  expense 
accounts.  Bills  rendered  by  the  operating  company  for  joint  expenses 
should  show  the  expenses  in  detail. 

The  amounts  so  handled  through  the  expense  accounts  should  not 
include  any  allowance  for  profit  or  return  upon  the  value  of  the  property 
used;  such  allowance,  if  any,  should  be  credited  by  the  payee  to  the 
appropriate  rent  revenue  account  and  charged  by  the  payor  to  the  appro¬ 
priate  rent  deduction  account. 


55 


TEXT  EXPLANATORY  OP  OPERATING  EXPENSE  ACCOUNTS 

I.  MAINTENANCE  EXPENSES 

601.  Supervision  of  Maintenance. 

This  account  should  include  the  pay  and  office  and  traveling  ex¬ 
penses  of  superintendents  and  their  assistants  when  directly  in  charge 
of  maintenance  of  telephone  plant,  including  general,  division,  and 
district  plant  superintendents,  engineers,  architects,  and  their  office 
and  field  forces;  the  cost  of  repairing  drafting  and  engineering  instru¬ 
ments,  and  the  original  cost  of  such  instruments  as  are  not  properly 
chargeable  to  fixed  capital  accounts;  the  cost  of  office  and  other  sup¬ 
plies  used  by  officers  and  employees  whose  salaries  are  charged  to  this 
account;  janitor  service,  light,  heat,  and  miscellaneous  office  expenses 
where  separate  offices  are  maintained  for  such  employees;  also  that 
portion  of  the  salaries  and  expenses  of  the  general  engineering  staff  of 
the  company  which  is  assignable  to  maintenance. 

602.  Repairs  of  Aerial  Plant. 

This  account  should  include  the  cost  of  repairs  of  all  plant  classi¬ 
fied  as  aerial  plant,  such  as  poles,  tow.ers,  cross  arms,  pins,  brackets, 
and  other  pole  fixtures;  braces,  guy  wires,  guy  stubs,  and  other  pole 
supports;  aerial  cables,  and  the  suspension  wires,  bolts,  clamps,  rings, 
hangers,  etc.,  used  to  attach  cables  to  poles,  towers,  or  other  supports; 
aerial  cable  loading  coils,  cable  boxes,  and  their  appurtenances;  and 
aerial  telephone  wires,  drop  wires,  tie  wires,  insulators,  and  sleeves. 
It  includes  also  the  cost  of  trimming  trees  and  clearing  and  removing 
obstructions  from  right  of  way  for  aerial  plant,  other  than  the  cost  of 
first  clearing  right  of  way. 

603.  Repairs  of  Underground  Plant. 

This  account  should  include  the  cost  of  repairs  of  all  plant  classi¬ 
fied  as '  underground  plant,  such  as  underground  conduits  and  their 
appurtenances;  underground  cables,  submarine  cables,  and  the  loading 
coils,  towers,  boxes,  and  fittings  belonging  to  such  cables.  It  also  in¬ 
cludes  the  cost  of  repairing  right  of  way  for  underground  and  sub¬ 
marine  cables,  and  the  cost  of  repaving  after  repairs  of  underground 
conduits. 

604.  Repairs  of  Central  Office  Equipment. 

This  account  should  include  the  cost  of  repairing  telephone  equip¬ 
ment  in  central  telephone  offices,  such  as  switchboards,  monitors’  and 
supervisors’  desks,  testing  outfits,  main  and  intermediate  frames,  cables, 
and  jumper  wires,  call  registers  and  meters,  relay  racks  and  coil  racks; 
equipment  for  generating  and  regulating  power  for  telephone  purposes, 
such  as  batteries,  engines,  motors,  generators,  rectifiers,  transformers, 
meters,  fuses,  and  protectors;  telephone  and  telegraph  instruments  and 
other  electrical  instruments  and  apparatus  in  the  central  office;  equip¬ 
ment  for  operators’  schools  and  rest  rooms,  and  furniture  and  fixtures 
required  for  the  uses  or  convenience  of  the  operating  forces. 

605.  Repairs  of  Station  Equipment. 

This  account  should  include  the  cost  of  repairing  station  apparatus, 
such  as  telephone  sets,  intercommunicating  sets,  bells,  backboards,  desk 
stands,  coin  boxes,  protectors,  battery  boxes,  batteries,  cords,  and  tele¬ 
phone  and  telegraph  instruments  or  parts  thereof;  interior  block  wires; 
private  branch  exchange  switchboards,  distributing  frames,  and  switch¬ 
board  cables,  and  booths  and  special  fittings  for  same,  such  as  desks, 
chairs,  fans,  and  cash  registers. 

Note — The  cost  of  renewals  of  batteries  at  stations  is  not  chargeable  to  this  account,  but 

to  account  No.  628,  “Transmission  Power.” 


56 


606.  Repairs  of  Buildings  and  Grounds. 

This  account  should  include  the  cost  of  repairing  general  offices, 
central  offices,  test  stations,  or  other  telephone  offices  and  the  fixtures 
(except  telephone  apparatus)  therein,  such  as  elevators,  plumbing,  appa¬ 
ratus  for  heating,  lighting,  ventilating,  and  power;  and  the  cost  of 
maintaining  yards  and  grounds,  with  their  fences,  sidewalks,  sewers, 
etc.,  appurtenant  to  such  buildings.  Charge  also  to  this  account  the  cost 
of  repairing  shops,  stores,  stables,  and  garages,  and  permanent  fixtures 
therein. 

607.  Station  Removals  and  Changes. 

This  account  should  include  the  cost  of  disconnecting  and  removing 
and  of  changing  the  location  of  all  plant  classified  as  subscribers’  station 
equipment  (as  defined  in  account  No.  230,  “Station  Equipment”),  includ¬ 
ing  freight  and  cartage  on  such  equipment  and  material  as  is  sent  to 
storehouse. 

(1)  When  stations  are  removed  (not  merely  changed  in  location) 
from  subscribers’  premises,  the  original  cost  (estimated,  if  not  known) 
of  the  station  should  be  credited  to  the  appropriate  fixed  capital 
accounts,  and  the  cost  of  the  instruments,  private  branch  exchange  appa¬ 
ratus,  booths,  and  fittings  should  be  charged  to  account  No.  122, 
“Materials  and  Supplies,”  while  the  cost  of  installation,  including  inside 
wires,  or  interior  block  wires,  and  that  portion  of  aerial  wire  which 
could  be  used  only  at  the  subscriber’s  premises  from  which  the  station 
is  removed,  less  the  value  of  any  salvage,  should  be  charged  to  this 
account. 

Note — When  extensive  replacements  are  made  of  subscribers’  station  equipment,  or 
of  drop  or  block  wiring  taken  out  of  service  because  of  inadequacy,  or  obsolescence,  as  when 
a  magneto  system  is  changed  to  a  common  battery  or  when  open  wire  distribution  is  replaced 
by  interior  block  construction,  the  cost  of  making  such  replacements  should  be  handled  through 
the  regular  construction  and  depreciation  accounts,  and  should  not  be  included  in  the  above 
account. 

(2)  If  wiring  left  from  previous  installations  is  reused  either  on 
same  or  other  premises,  the  gain  should  be  credited  to  this  account. 
This  includes  the  gain  on  inside  wires  and  interior  block  wires  and  on 
that  portion  of  aerial  wire  which  could  be  used  only  at  subscribers’ 
premises. 

(3)  When  stations  are  disconnected  but  left  on  premises,  charge 
to  this  account  the  cost  of  disconnecting,  and  when  reconnected,  the  cost 
of  reconnecting. 

(4)  When  station  location  or  service  is  changed,  charge  to  this 
account  the  cost  of  such  changes,  less  the  amount,  if  any,  properly 
chargeable  to  fixed  capital  accounts  for  actual  additions  to  plant. 

(5)  Credit  to  this  account  amounts  charged  subscribers  for  moves 
and  changes. 

608.  Depreciation  of  Plant  and  Equipment. 

Charge  to  this  account  monthly  the  amount  estimated  to  be  neces¬ 
sary  to  cover  the  depreciation  accruing  during  the  month  in  the 
company’s  tangible  fixed  capital  (except  depreciation  provided  in  “Clear¬ 
ing  Accounts,”  Nos.  701,  702,  and  703).  Amounts  charged  to  this  account 
should  be  concurrently  credited  to  account  No.  102,  “Reserve  for  Accrued 
Depreciation — Cr.”  (See  sec.  23,  p.  53.) 

609.  Extraordinary  Depreciation. 

This  account  should  be  charged  monthly  with  such  an  amount  as 
will,  through  its  regular  application,  amortize  any  amount  that  may  be 
carried  in  suspense  on  account  of  extraordinary  casualties  and  unantici¬ 
pated  reconstruction.  (See  sec.  24,  p.  53.) 

610.  Other  Maintenance  Expenses. 

This  account  should  include  cost  of  repairing  telephone  plant  and 
equipment  not  provided  for  elsewhere. 

611.  Repairs  Charged  to  Reserves — Cr. 

Credit  to  this  account  and  charge  concurrently  to  account  No.  102, 
“Reserve  for  Accrued  Depreciation — Cr.,”  an  amount  equal  to  the  cost 


57 


of  extraordinary  repairs  made  for  which  provision  had  been  made  in 
that  reserve;  also,  credit  to  this  account  and  charge  concurrently  to  the 
insurers  or  to  the  insurance  reserve  an  amount  equal  to  the  cost  of 
repairs  made  necessary  by  casualties,  when  such  cost  is  covered  by 
insurance  or  an  insurance  reserve.  (See  sec.  21,  p.  52.) 

II.  TRAFFIC  EXPENSES 

620.  Central  Office  Superintendence. 

This  account  should  include  the  cost  of  all  central  office  superin¬ 
tendence  as  provided  in  the  following  subaccounts: 

621.  Traffic  Superintendence. 

This  account  should  include  the  pay  and  traveling  expenses  of 
officers  and  their  assistants  when  directly  in  charge  of  traffic,  either  for 
the  company  as  a  whole  or  a  territorial  subdivision;  also  cost  of  office 
supplies,  stationery,  and  printing;  janitor  service,  light,  heat,  and  mis¬ 
cellaneous  office  expenses  if  separate  offices  are  maintained  for  such 
employees. 

622.  Service  Inspection. 

This  account  should  include  the  pay  and  expenses  of  service  inspec¬ 
tion  forces,  including  all  employees  on  this  work  not  engaged  in  the 
regular  handling  of  the  traffic. 

623.  Clerical  Operating  Wages. 

This  account  should  include  the  pay  of  clerks,  stenographers,  and 
office  boys  engaged  in  traffic  work  in  central  office  operating  rooms. 

624.  Operators’  Wages. 

This  account  should  include  the  pay  of  chief  operators,  assistant 
chief  operators,  monitors,  supervisors,  information  operators,  directory 
operators,  operators  employed  in  the  distribution  of  tickets  to  other 
operators,  operators  engaged  in  quoting  toll  rates  and  charges,  switch¬ 
board  operators,  telegraph  operators,  and  all  other  operators  employed 
in  the  operation  of  the  central  office  equipment. 

625.  Central  Office  Supplies  and  Expenses. 

This  account  should  include  the  cost  of  all  central  office  supplies 
and  expenses  as  provided  in  the  following  subaccounts: 

*  626.  j Rest  and  Lunch  Rooms. 

This  account  should  include  the  cost  of  operating  the  retiring,  rest, 
and  lunch  rooms  for  central  office  employees,  including  the  cost  of 
lunches  provided  for  such  employees.  Credit  to  this  account  amounts 
received  for  lunches  served. 

627.  Operators'  Schooling. 

This  account  should  include  the  expenses  of  training  new  operators 
(whether  a  school  is  maintained  or  not),  including  wages  paid  them  for 
which  no  service  is  rendered,  the  salaries  and  expenses  of  instructors, 
and  supplies  furnished  to  schools  for  operators. 

628.  Transmission  Power. 

This  account  should  include  the  cost  of  power  purchased  for  trans¬ 
mitting  traffic  and  for  operating  signals;  the  cost  of  renewing  local  and 
central  office  batteries;  and  the  cost  of  labor  employed  and  supplies 
consumed  in  operating  the  generating  plant  and  storage  batteries  for 
transmitting  current  or  for  operating  signals. 

629.  Central  Office  Stationery  and  Printing. 

This  account  should  include  the  cost  of  all  postage,  stationery,  sta¬ 
tionery  supplies,  and  printing  for  use  of  central  offices. 

630.  Messenger  Service. 

This  account  should  include  pay  and  expenses  of  messengers 
employed  in  delivering  messages  and  notifying  persons  of  calls  at 
telephone  stations. 


58 


631.  Miscellaneous  Central  Office  Expenses. 

This  account  should  include  the  cost  of  water,  ice,  fuel,  lights, 
towels,  toilet  supplies,  and  of  janitor  service  and  other  care  of  central 
offices. 

632.  Pay  Station  Expenses. 

This  account  should  include  all  traffic  expenses,  except  commis¬ 
sions  and  central  office  operating  expenses,  incurred  in  connection  with 
the  operation  of  public  pay  stations. 

633.  Other  Traffic  Expenses. 

This  account  should  include  all  traffic  expenses  not  elsewhere  pro¬ 
vided  for. 

Note — Rent  paid  for  central  offices  is  chargeable  to  account  No.  331,  “Rent-Deductions 
for  Telephone  Offices,”  and  not  to  this  account. 

III.  COMMERCIAL  EXPENSES 

640.  Commercial  Administration. 

This  account  should  include  the  pay  and  expenses  of  officers  and 
their  office  forces  directly  in  charge  of  the  commercial  department,  either 
for  the  company  as  a  whole  or  for  a  territorial  subdivision;  the  pay  and 
expenses  of  employees  when  engaged  in  preparing  contract  orders,  hand¬ 
ling  unsolicited  contracts  or  contract  changes  including  miscellaneous 
relations  with  subscribers  and  patrons  not  specifically  assignable  to 
promotion,  collection,  or  directory  expenses.  Charge  also  to  this  account 
the  cost  of  postage,  printing,  and  stationery;  janitor  service,  light,  heat, 
and  miscellaneous  office  expenses  if  separate  offices  are  maintained  for 
such  employees. 

Note — This  account  may  include  the  entire  pay  and  expenses  of  employees  of  the  com¬ 
mercial  department  who  are  only  incidentally  engaged  in  duties  in  connection  with  promotion, 
collection,  and  directories;  if  such  employees  are  assigned  all  or  part  of  their  time  to  such 
duties  their  pay  and  expenses  should  be  charged  proportionately  to  the  accounts  provided 
for  such  expenses. 

641.  Promotion  Expenses. 

This  account  should  include  the  pay  and  expenses  of  employees  and 
the  cost  of  demonstrations,  advertising,  and  canvassing  designed  to  pro¬ 
mote  the  extension  of  the  company’s  business,  as  provided  for  in  the 
following  subaccounts: 

642.  Advertising. 

This  account  should  include  salaries  and  expenses  of  the  advertising 
manager,  his  assistants  and  clerks;  cost  of  commercial  advertisements 
in  newspapers  or  magazines;  posters,  bulletins,  advertising  sundries, 
booklets,  and  all  related  items;  also  minor  rents  and  cost  of  installing 
and  operating  telephones  in  public  places  wholly  for  demonstration 
purposes. 

643.  Canvassing. 

This  account  should  include  expenses  incurred  in  soliciting  new 
business  or  for  changing  or  renewing  existing  service,  including  the 
pay  and  expenses  of  canvassers. 

644.  Sublicensee  Relations. 

This  account  should  include  expenses  incurred  in  developing  the 
exchange  of  business  with  sublicensee  companies  and  independent  con¬ 
necting  telephone  companies. 

645.  Collection  Expenses. 

This  account  should  include  the  cost  of  accounting  for  and  collecting 
the  revenues  of  the  company,  as  provided  for  in  the  following  sub¬ 
accounts. 

646.  Revenue  Accounting. 

This  account  should  include  the  cost  of  keeping  accounts  with  sub¬ 
scribers  and  rendering  bills  for  revenue  service,  including  the  cost  of 
postage,  stationery,  and  printing,  and  pay  and  expenses  of  bookkeepers 
and  all  clerks  in  accounting  department  having  to  do  with  subscribers’ 
accounts. 


59 


647.  Revenue  Collecting. 

This  account  should  include  the  expenses  of  the  collection  bureau, 
including  postage,  stationery,  and  printing,  collectors’  salaries  or  com¬ 
missions,  car  fares,  cost  of  badges,  and  of  delivering  bills. 

648.  Pay  Station  Commissions. 

This  account  should  include  commissions  allowed  for  handling 
exchange  and  toll  service  messages  from  public  pay  stations. 

649.  Directory  Expenses. 

This  account  should  include  the  cost  of  preparing,  printing,  and 
distributing  directories,  including  the  cost  of  soliciting  advertisements 

i  for  directories.  (See  account  No.  132,  “Prepaid  Directory  Expense.”) 

650.  Other  Commercial  Expenses. 

This  account  should  include  all  commercial  expenses  not  provided 
for  elsewhere. 

IV.  GENERAL  AND  MISCELLANEOUS  EXPENSES 

660.  General  Office  Salaries. 

This  account  should  include  the  matters  provided  for  in  the  follow¬ 
ing  subaccounts: 

661.  Salaries  of  General  Officers. 

This  account  should  include  the  salaries  of  the  chairman  of  the 
board,  president,  vice  president,  secretary,  treasurer,  comptroller,  gen¬ 
eral  auditor,  general  manager,  general  superintendent,  and  all  other 
officers  whose  jurisdiction  extends  to  the  operations  of  the  company  as 
a  whole. 

662.  Salaries  of  General  Office  Clerks. 

This  account  should  include  the  salaries  and  wages  of  bookkeepers, 
paymasters,  cashiers,  stenographers,  and  all  other  clerks  employed  in 
the  general  office,  except  those  engaged  in  revenue  accounting  and  col¬ 
lecting. 

663.  General  Office  Supplies  and  Expenses. 

This  account  should  include  the  matters  provided  for  in  the  follow¬ 
ing  subaccounts: 

664.  Expenses  of  General  Officers  and  Clerks.  9 

This  account  should  include  the  traveling  and  incidental  expenses 
of  general  officers  and  other  general  office  employees. 

665.  General  Office  Stationery  and  Printing. 

This  account  should  include  the  cost  of  all  postage,  stationery, 
stationery  supplies,  and  printing  for  use  in  general  offices,  except  that 
used  in  revenue  accounting  and  collecting. 

666.  Other  General  Office  Supplies  and  Expenses. 

This  account  should  include  the  cost  of  office  supplies  (other  than 
postage,  stationery,  and  printing),  repairs  of  office  furniture  and  replace¬ 
ments  of  such  furniture  as  has  not  been  capitalized;  cost  of  telegrams 
and  of  any  special  telephone  service;  wages  of  janitors,  porters,  and 
messengers;  and  other  miscellaneous  expenses  of  general  offices. 

Note — Rents  of  general  offices  (less  such  estimated  cost,  if  any,  as  is  included  to  cover 
the  expense  of  furnishing,  heating  and  lighting  them  by  the  lessor)  should  be  charged  to 
account  No.  331,  “Rent  Deductions  for  Telephone  Offices.” 

667.  General  Law  Expenses. 

This  account  should  include  all  law  expenses  (except  those  incurred 
in  the  defense  and  settlement  of  damage  claims),  including  pay  and 
expenses  of  all  counsel,  solicitors,  and  attorneys,  their  clerks  and  attend¬ 
ants,  janitor  service,  light,  heat,  and  other  expenses  of  their  offices;  cost 
of  law  books,  printing  briefs,  legal  forms,  testimony,  reports,  etc.;  fees 
and  retainers  for  services  of  attorneys  not  regular  employees;  court 
costs  and  payments  of  special,  notarial,  and  witness  fees  not  provided 
for  elsewhere;  expenses  connected  with  taking  depositions;  and  all 
law  and  court  expenses  not  provided  for  elsewhere. 

Note — The  compensation  of  the  general  solicitor  or  counsel  or  other  attorneys  er gaged 
partly  in  the  defense  or  settlement  of  damage  suits  and  partly  in  other  legal  work  sh<  uld 
be  properly  apportioned  between  this  account  and  account  No.  670,  “Law  Expenses  Con¬ 
nected  with  Damages.” 


60 


668.  Insurance. 

This  account  should  include  premiums  paid  to  insurance  companies 
for  fire,  fidelity,  boiler,  casualty,  burglar,  and  all  other  insurance. 
Charge  also  to  this  account  and  credit  account  No.  169,  “Insurance  and 
Casualty  Reserves,”  amounts  set  aside  as  an  insurance  reserve. 

This  account  should  be  credited  and  the  proper  fixed  capital  account 
or  accounts  concurrently  charged  with  the  cost  of  insurance  applicable 
to  construction  work. 

Note— In  annual  reports  to  the  Commission  the  company  will  be  required  to  report  the 

charges  made  to  this  account  for  the  various  kinds  of  insurance,  and  for  self-insurance. 

669.  Accidents  and  Damages. 

This  account  should  include  all  expenses  (other  than  law  expenses) 
incurred  on  account  of  persons  killed  or  injured  and  on  account  of 
property  of  others  damaged  when  such  expenses  have  not  been  provided 
for  by  insurance  or  by  a  reserve.  It  includes  the  pay  and  expenses  of 
claim  agents,  investigators,  and  adjusters;  wages  paid  employees  if 
absent  on  account  of  injury;  fees  and  expenses  of  surgeons  and  doctors; 
nursing,  hospital  attendance,  medical  and  surgical  supplies,  fees  and 
expenses  of  coroners  and  undertakers,  and  contributions  to  hospitals; 
also  amounts  paid  in  settlement  of  personal  injury  or  damage  claims. 

This  account  should  be  credited  and  the  proper  subdivisions  of  fixed 
capital  accounts  concurrently  charged  with  the  expenses  of  accidents 
and  damages  incident  #to  construction  work. 

670.  Law  Expenses  Connected  with  Damages. 

This  account  should  include  all  law  expenses  connected  with  the 
defense  or  settlement  of  damage  claims,  including  a  proper  proportion 
of  the  salaries  and  expenses  of  the  general  solicitor  or  counsel,  and 
salaries,  fees,  and  expenses  of  attorneys  engaged  in  this  work;  fees  of 
court  stenographers  and  other  court  expenses;  the  cost  of  law  books, 
printing  briefs,  court  records,  and  similar  papers  in  connection  with 
such  cases. 

This  account  should  be  credited  and  the  proper  subdivisions  of  fixed 
capital  accounts  concurrently  charged  with  law  expenses  incident  to 
damage  claims  arising  out  of  construction  work. 

671.  Miscellaneous  General  Expenses. 

This  account  should  include  the  matters  provided  for  in  the  following 
subaccounts: 

672.  Relief  Department  and  Pensions. 

This  account  should  include  pensions  or  other  benefits  paid  to 
employees  or  representatives  of  former  employees  and  expenses  in  con¬ 
nection  therewith;  salaries  and  expenses  incurred  in  conducting  a  relief 
department,  and  contributions  made  to  such  department. 

673.  Telephone  Franchise  Requirements. 

This  account  should  include  the  cost  of  all  service  and  materials 
and  supplies  furnished  to  municipal  corporations  in  compliance  with 
franchise  requirements  and  for  which  no  payment  is  received  by  the 
company;  also  of  all  direct  expense,  such  as  paving  and  other  like 
matters,  incurred  in  compliance  with  such  requirements  and  for  which 
no  reimbursement  is  received  by  the  company.  This  does  not  include 
such  expense  incurred  in  connection  with  construction  or  repairs,  which 
should  be  charged  to  fixed  capital  or  maintainance  accounts.  Amounts 
charged  to  this  account  for  which  there  is  no  direct  money  outlay 
should  be  credited  to  account  No.  676,  “Telephone  Franchise  Require¬ 
ments—  Cr.” 

674.  Amortization  of  Franchises  and  Patents. 

This  account  should  include  each  month  the  amount  necessary  to 
cover  such  portions  of  the  life  of  limited  franchises  and  patents  as  has 
expired  or  been  consumed  during  the  month.  The  amount  so  charged 
should  be  concurrently  credited  to  account  No.  103,  “Reserve  for 
Amortization  of  Intangible  Capital — Cr.” 

Note — The  amount  charged  to  this  account  should  be  based  upon  a  rule  determined 
by  the  accounting  company,  the  purpose  and  effect  of  such  rule  being  to  accumulate  by  charges 
equitably  distributed  throughout  the  life  of  any  franchise  or  patent,  a  reserve  that  will,  at 
the  expiration  of  its  life,  equal  the  original  cost. 


61 


675.  Other  General  Expenses. 

This  account  should  include  such  incidental  general  expenses  as 
are  not  provided  for  in  the  foregoing  accounts,  such  as  cost  of  pub¬ 
lishing  notices  of  stockholders’  meetings,  of  election  of  directors, 
annual  reports  in  newspapers,  and  of  dividends  declared,  and  fees  and 
expenses  paid  to  directors,  expenses  of  transfer  agents,  and  listing  of 
stocks  on  exchange. 

676.  Telephone  Franchise  Requirements — Cr. 

This  account  should  include  the  amounts  included  in  account  No. 
673,  “Telephone  Franchise  Requirements,”  for  which  there  is  no  actual 
money  outlay. 


CLEARING  ACCOUNTS 


[Required  of  Class  A  and  Class  B  Companies.] 

The  following  accounts  are  provided  for  certain  expenses  which  usually 
affect  several  classes  of  operations  but  need  to  be  brought  together  in  one 
account  in  order  that  the  total  of  the  expenses  may  be  known  and  properly 
distributed. 

701.  Shop  Expense. 

This  account  or  appropriate  subaccounts  should  be  arranged  so 
as  to  record  separately  the  expenses  of  the  general  shops  as  follows: 
(1)  Salaries  and  wages  of  shop  employees;  (2)  personal  and  incidental 
expenses  of  such  employees;  (3)  materials  and  supplies  for  general 
shop  use;  (4)  repairs  of  shop  tools  and  machinery;  (5)  rent  paid  for 
shop  buildings;  (6)  depreciation  of  shop  tools,  machinery,  and 
appliances. 

The  shop  expense  account  should  be  cleared  by  apportioning  the 
total  amount  of  the  expenses  to  the  various  jobs  on  an  equitable  basis. 

702.  Stable  and  Garage  Expense. 

This  account  or  appropriate  subaccounts  should  be  arranged  so 
as  to  record  separately  the  expenses  of  stables  and  garages  as  follows: 
(1)  Salaries  and  wages  of  drivers,  chauffeurs,  stablemen,  garageinen, 
and  other  employees  in  stables  and  garages;  (2)  personal  and  incidental 
expenses  of  such  employees;  (3)  materials  and  supplies,  including  fuel 
and  gasoline,  harness,  tires,  and  other  supplies  for  stables  and  garages; 
(4)  repairs  of  automobiles  and  other  vehicles  and  harness;  (5)  rent 
paid  for  buildings,  horses  and  vehicles;  (6)  depreciation  on  vehicles, 
horses,  harness,  etc.,  including  losses  unprovided  for  by  reserves  or 
insurance. 

Credit  to  this  account  any  charges  for  service  performed  for 
others. 

A  record  should  be  kept  of  the  use  of  teams  and  automobiles,  and 
the  total  expense  should  be  apportioned  to  the  proper  accounts  accord¬ 
ing  to  use,  or  the  debits  to  the  expense  accounts  may  be  made  at  rates 
per  hour  of  service  which  have  been  found  to  be  fair  and  to  distribute 
the  total  expense  equitably. 

703.  Tool  Expense. 

Charge  to  this  account  all  expense  for  tools  (except  shop  tools  and 
tools  carried  as  supplies  unissued).  It  includes  (1)  the  cost  of  small 
hand  tools  of  which  no  account  is  kept  after  issue;  (2)  the  cost  of 
repairing  tools;  (3)  the  cost  of  tools  lost  or  stolen;  (4)  depreciation 
on  tools  taken  out  of  service  because  of  breakage  or  other  deterioration. 

This  account  should  be  cleared  by  adding  to  the  expense  oft  repairs 
and  cost  of  plant  installed  such  amounts  as  will  equitably  distribute 
the  total  expense  for  tools. 

704.  Supply  Expense. 

Charge  to  this  account  or  to  appropriate  subaccounts  all  expenses 
(except  insurance  and  taxes)  incurred  directly  in  connection  with  the 
purchase,  storage,  handling,  and  distribution  of  materials  and  supplies 


62 


and  stationery.  It  includes  (1)  the  pay  and  expenses  of  purchasing 
agents,  managers  of  stores,  clerks,  and  laborers;  (2)  rents  paid  for 
stores;  (5)  cost  of  lighting  and  heating;  (4)  undistributed  transporta¬ 
tion  charges;  (5)  discounts  recovered  through  prompt  payment  of 
bills  for  materials  and  supplies ’when  such  discounts  cannot  be  assigned 
to  the  particular  bills;  (6)  overages  or  shortages  in  the  materials  and 
supplies  account  disclosed  by  inventories  which  can  not  be  assigned 
to  specific  accounts;  and  (7)  the  estimated  depreciation  on  materials 
and  supplies  due  to  breakage,  leakage,  shortage,  and  wear  and  tear. 

This  account  should  be  cleared  by  adding  to  the  cost  of  materials 
and  supplies  Massing  through  stores  a  suitable  loading  charge  which 
will  equitably  xlistribute  the  total  cost  of  conducting  the  stores  and  by 
adding  to  the  cost  of  such  supplies  as  are  bought  by  the  purchasing 
department  a  pro  rata  share  of  the  total  expense  for  the  purchasing 
department. 

705.  Engineering  Expense. 

Charge  to  this  account  or  to  appropriate  subaccounts  all  expenses 
for  engineering  so  as  to  show  separately  the  following:  (1)  Salaries 
and  wages;  (2)  personal  and  incidental  expenses  of  engineering 
department  employees;  (3)  rent  paid  for  office  and  (4)  office  expenses. 

This  account  should  be  cleared  by  apportioning  the  total  expenses 
to  operating  expenses  and  fixed  capital  accounts  on  the  basis  of  service 
rendered,  as  determined  by  the  actual  time  devoted  to  particular  jobs 
or  on  an  equitable  basis  fixed  by  the  officers  of  the  company. 

706.  Plant  Supervision  Expense. 

Charge  to  this  account  the  cost  of  general  supervision  of  the  main¬ 
tenance  and  construction  of  the  plant  where  a  separate  department  of 
the  company’s  organization  is  charged  with  such  supervision.  It 
includes  the  pay  and  expenses  of  the  plant  supervising  officers,  such  as 
the  general  plant  superintendent,  district  plant  superintendent,  plant 
engineers  and  their  office  and  field  forces,  charged  with  planning  for 
and  superintending  the  work  of  maintenance  and  plant  construction. 

This  account  or  appropriate  subaccounts  should  be  so  arranged  as 
to  show  in  detail  the  expenses  of  the  plant  supervision  department  as 
follows:  (1)  Salaries  and  wages;  (2)  personal  and  incidental  expenses 
of  employees;  (3)  rent  paid  for  offices;  and  (4)  office  expenses. 

This  account  should  be  cleared  by  charging  directly  to  the  appro¬ 
priate  accounts  such  expenses  as  can  be  allocated  to  particular  pieces 
of  work  and  by  charging  out  the  balance  on  the  basis  of  labor  employed 
in  all  construction  or  maintenance  work  in  progress. 

Note — The  pay  of  general  foremen  and  foremen  in  direct  charge  of  jobs  should  be  included 
in  the  cost  of  the  job  and  not  charged  to  this  account. 

707.  House  Service  Expense. 

This  account  should  include  the  expenses  pertaining  to  the  opera¬ 
tion  of  offices  and  buildings,  whether  owned  or  rented  by  the  company, 
when  such  expenses  can  not  be  allocated  as  they  accrue  to  the  operating 
expense  accounts  and  other  accounts.  This  account  includes  fuel,  heat, 
light,  power,  elevator  service,  janitor  service,  and  like  expenses,  but 
does  not  include  rents,  insurance,  taxes,  and  maintenance  expenses. 

This  account  should  be  cleared  by  apportioning  the  entire  expense 
to  the  operating  expenses  and  other  accounts  on  basis  of  the  use  made 
of  such  property. 


